What is avicorp pre-tax cost of debt

Assignment Help Financial Management

Reference no: EM131346592

Avicorp has a $14.5 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual 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 pre-tax cost of debt? Note: Compute the effective annual return. (round to 4 decimal places)

b. If Avicorp faces a 40% tax rate, what is its after-tax cost of debt? ( round to 4 decimal places)

Reference no: EM131346592

Questions Cloud

What is the journal entry to record the tax accrual : Wingo Inc. which has a 34 percent income tax rate ( also assume this is the applicable tax rate) is considering making a substantial investment in marketable securities that will generate annual income of $400,000. Analyze each of the following four ..

Using earned value management in projects : Using Earned Value Management in projects, multi-functional control account plans should have:

Dimensions of performance in earned value project management : The three dimensions of performance in Earned Value Project Management are:

Beta of the stock-expected return on market : A share of stock sells for $51 today. The beta of the stock is 1, and the expected return on the market is 10 percent. The stock is expected to pay a dividend of $1 in one year. If the risk-free rate is 4.5 percent, what will the share price be in on..

What is avicorp pre-tax cost of debt : Avicorp has a $14.5 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual 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. What is? Avicorp's pr..

Calculate risk-neutral probability and portfolio composition : Consider a 9-month American call option on a fictitious stock BlackIce with strike price $20. Current spot price is both $20. A continuously compounded ri sk-free interest rate is 2% and a continuously compounded dividend is 2%. Estimate the price of..

Company plans expansion-weighted average cost of capital : The Black Bird Company plans an expansion. The expansion is to be financed by selling $176 million in new debt and $135 million in new common stock. The before-tax required rate of return on debt is 8.90% percent and the required rate of return on eq..

Consider bond with face value-what is yield to maturity : Consider a bond with $1000 face value and 5 years to maturity. What is the yield to maturity if the bond is currently selling at par and offers a 6% coupon rate (paid annually)? Provide an explanation for your result.

Financial statements of the green hills water district : The Green Hills Water District was established on January 1 to provide water service to a suburban development. It accounts for its operations in a single enterprise fund. Describe briefly how the financial statements of the Green Hills Water Distric..

User Account

All Pages