Avicorp has a $12.6 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 95% of par value.
(a) What is Avicorp's pretax cost of debt? ( round answer to 4 decimal places)
(b) If Avicorp faces a 40% tax rate, what is its after-tax cost of debt? ( Round answer to 4 decimal places)