Avicorp has a ($15) million debt issue outstanding, with an 8% coupon rate. The debt has semiannual
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Avicorp has a \($15\) million debt issue outstanding, with an 8% coupon rate. The debt has semiannual coupons, the next coupon is due in six months, and the debt matures in eight years. It is currently priced at 98% of par value.
a. What is Avicorp’s pre-tax cost of debt?
b. If Avicorp faces a 35% tax rate, what is its after-tax cost of debt?
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