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Posted on Jul 27, 2024

Avicorp has a $10 million debt issue outstanding, with a 6% coupon rate. The debt has semi annual coupons and the next coupon is due

Avicorp has a $10 million debt issue outstanding, with a 6% coupon rate. The debt has semi annual coupons and the next coupon is due in six months, and the debt matured in five years. It is currently prices at 95% par value.

A) what is avicorps pre tax cost of debt

B) if avicorp faces a 40% tax rate what is its after tax cost of debt

(Please explain with steps)

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