Avicorp has a $11.8 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 94.26% of par value.

a. What is Avicorp's pretax cost of debt?

b. If Avicorp faces a 28% 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