Problem:
Avicorp has a 12.8 million debt issue outstanding with 5.9% coupon rate. The debt has semi anual coupons,the next coupon is due in six months, and the debt matures in five years and it is currently priced at 93%of par value.
Required:
Question 1: What is avicorps pre tax cost of debt?
Question 2: If avicorp faces 40% tax rate what is its afer tax cost of debt?
Note: Please provide through step by step calculations.