Compute the effective annual return

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Reference no: EM132042720

Avicorp has a $ 10.1 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?

ROUND TO 4 DECIMAL PLACES

b. If Avicorp faces s 40% tax rate, what is its after-tax cost of debt?

ROUND TO 4 DECIMAL PLACES

Reference no: EM132042720

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