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Please round to four decimal places. Will upvote! Avicorp has a $10.6 million debt issue outstanding, with a 6.2% coupon rate. The debt has semi-annual

Please round to four decimal places. Will upvote!image text in transcribed

Avicorp has a $10.6 million debt issue outstanding, with a 6.2% 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% of par value. a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual return. 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. a. The cost of debt is % per year. (Round to four decimal places.)

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