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Avicorp has a $ 1 3 . 1 million debt issue outstanding, with a 5 . 9 % coupon rate. The debt has semi -

Avicorp has a $13.1 million debt issue outstanding, with a 5.9% coupon rate. The debt has semi-annual coupons, the next coupon is due in six month's, and the debt matures in five years. It is currently priced at 93% 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?
Note: Assume that the firm will always be able to utilize its full interest tax shield.
a. The cost of debt is % per year. (Round to four decimal places.)
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