Asked by Shawn

Avicorp has a $14.3 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 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?
Answered by lee
180000
Answered by sh
avicorp’s cost of debt is 3.60% per 6 months or 7.34% per annum.
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