Avicorp has a $13.6 million debt issue​ outstanding, with a 6.2 %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 94 % 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.

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