Question
Avicorp has a $ 12.9 million debt issue outstanding, with a 6.1 % coupon rate. The debt has semi-annual coupons, the next coupon is due
Avicorp has a $ 12.9 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 96 % of par value.
a. What is Avicorp's pre-tax cost of debt in percentage? Note: Compute the effective annual return. (ROUND TO FOUR DECIMALS)
b. If Avicorp faces a 40 % tax rate, what is its after-tax cost of debt in percentage? Note: Assume that the firm will always be able to utilize its full interest tax shield. (ROUND TO FOUR DECIMALS)
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International Financial Reporting And Analysis
Authors: David Alexander, Ann Jorissen, Martin Hoogendoorn
8th Edition
978-1473766853, 1473766850
