Avicorp has a 142 million debt issue outstanding with a 58, Financial Management

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Avicorp has a 142 million debt issue outstanding with a 58

Avicorp has a $ 14.2 million debt issue outstanding, with a 5.8% 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 96% 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: Avicorp has a 142 million debt issue outstanding with a 58

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Financial Management: Avicorp has a 142 million debt issue outstanding with a 58

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