Avicorp has a $ 1 1 . 7 million debt issue outstanding, with a 5 . 8
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Question:
Avicorp has a $ million debt issue outstanding, with a 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 of par value.
a What is Avicorps pretax cost of debt?
b If Avicorp faces a tax rate, what is its aftertax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield.
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