Question: please answer a and b only if you know 100% Avicorp has a $10.7 milion debt issue outstanding with a 59% coupon rate. The debt
Avicorp has a $10.7 milion debt issue outstanding with a 59% 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 96% of par value a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual retum 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) ed
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