has a

$14.7

million debt issue outstanding, with a

5.9%

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

95.52%

of par value.

a. What is

Avicorp's

pretax cost of debt?

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.

Round to two decimal places