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Avicorp has a $ 14.6 million debt issue? outstanding, with a 5.9 % coupon rate. The...

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Finance

Avicorp has a $ 14.6 million debt issue? outstanding, with a 5.9% coupon rate. The debt has? semi-annual coupons, the next couponis due in six? months, and the debt matures in five years. It iscurrently priced at 93 % of par value.

a. What is? Avicorp's pre-tax cost of? debt? Note: Compute theeffective annual return.

b. If Avicorp faces a 40 % tax? rate, what is its? after-taxcost of? debt? ?Note: Assume that the firm will always be able toutilize its full interest tax shield.

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Avicorp has a $ 14.6 million debt issue? outstanding, with a 5.9% coupon rate. The debt has? semi-annual coupons, the next couponis due in six? months, and the debt matures in five years. It iscurrently priced at 93 % of par value.a. What is? Avicorp's pre-tax cost of? debt? Note: Compute theeffective annual return.b. If Avicorp faces a 40 % tax? rate, what is its? after-taxcost of? debt? ?Note: Assume that the firm will always be able toutilize its full interest tax shield.

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