Avicorp has a $ 13.2$13.2million debt issue outstanding, with a 6.2 %6.2%coupon rate. The debt has semiannual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 93 %93%of par value.

a. What is Avicorp's cost of debt? Note: Compute the effective annual return.

b. If Avicorp faces a 40 %40% tax rate, what is its after-tax cost of debt?