What is avicorps pre-tax cost of debt if avicorp faces a 40, Financial Management

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What is avicorps pre-tax cost of debt if avicorp faces a 40

Avicorp has a $ 10.9 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 95 % 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: What is avicorps pre-tax cost of debt if avicorp faces a 40

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