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 to four decimal places.$)$

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par value.

a$.$ What is Avicorp's cost of debt? Note: Compute the effective annual return.

b$.$ If Avicorp faces a $40\%$ tax rale, 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$.$ What is Avicorp's cost of debt? Note: Compute the effective annual return.

The cost of debt is the yield$-$to$-$maturity $($VTM$)$ on the outstanding debt issue. We solve for the $6-$month VTM on the bond:

$$930=\frac{\text{\$}31\mathrm{.}00}{(1+YTM)}+\frac{\text{\$}31\mathrm{.}00}{(1+YTM{)}^2}+$cdots$+\frac{\text{\$}31\mathrm{.}00}{(1+YTM{)}^9}+\frac{\text{\$}31\mathrm{.}00+\text{\$}1,000}{(1+YTM{)}^{10}}$

Therefore,

$YTM=3\mathrm{.}9614\%$

Then, compute the effective

annual return $($EAR$)$ as:

i added an example: the question is the one that appears first pls use those numbers and use example to guide you