What is its after tax cost of debt

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Lcorp has a $11.9 million debt issue outstanding, with a 5.9% 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 94% of par value.

a. What is Lcorps pre tax cost of debt? note: compute the effective annual return

b. If Lcorp faces a 40% tax rate, what is its after tax cost of debt?

Reference no: EM13939641

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