Should we reject the model at the 5% confidence level

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Question: Avicorp has a $13.2 million debt issue? outstanding, with a 6.2% coupon rate. The debt has semiannual? coupons, the next coupon is due in six? months, and the debt matures in five years. It is currently priced at 93% of par value.

a. What is? Avicorp's cost of? debt? Note: Compute the effective annual return.

b. If Avicorp faces a 40% tax? rate, what is its? after-tax cost of? debt??Note: Assume that the firm will always be able to utilize its full interest tax shield.

Reference no: EM133430170

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