Avicorp has a $ 11.5 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 93 % 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 4 decimal places)

B. If Avicorp faces a 40 % tax rate, the after-tax cost of debt is ____% (Round 4 decimal places)