Avicorp has a 125 million debt issue outstanding with a 61, Ask an Expert

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Avicorp has a $12.5 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 94% of par value.

a. What is Avicorp's pre-tax 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?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92879329

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