Question: I thought it was 7.0000% but got it wrong. Can't afford to get it wrong, please help. Avicorp has a $10.4 million debt issue outstanding,

I thought it was 7.0000% but got it wrong. Can't afford to get it wrong, please help.

Avicorp has a $10.4 million debt issue outstanding, with a 5.8% 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% 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 |7.0000 % per year. (Round to four decimal places.)

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