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A: The net proceeds from the sale of the bond, Nd , is$___ B: Using the bond's YTM, the before-tax cost of debt is ___%
A: The net proceeds from the sale of the bond, Nd, is$___
B: Using the bond's YTM, the before-tax cost of debt is ___%
C: Using the bond's YTM, the after-tax cost of debt is ___
D: Using the approximation formula, the before-tax cost of debt is ___
E: Using the approximation formula, the after-tax cost of debt is ___
Cost of debt using both methods (YTM and the approximation formula) Currently, Warren Industries can sell 15-year, $1,000-par-value bonds paying annual interest at a 8% coupon rate. Because current market rates for similar bonds are just under 8%, Warren can sell its bonds for $970 each; Warren will incur flotation costs of $25 per bond. The firm is in the 27% tax bracket. a. Find the net proceeds from the sale of the bond, No b. Calculate the bond's yield to maturity (YTM) to estimate the before-tax and after-tax costs of debt. c. Use the approximation formula to estimate the before-tax and after-tax costs of debt. () a. The net proceeds from the sale of the bond, No, is $. (Round to the nearest dollar.)Step by Step Solution
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