Cost of debt using both methods (YTM and the approximation formula)Currently, Warren Industries can sell

20-year, 1,000-par-value bonds paying annual interest at a 13% coupon rate. Because current market rates for similar bonds are just under 13%, Warren can sell its bonds for $960 each; Warren will incur flotation costs of $20 per bond. The firm is in the 21% tax bracket.

a.Find the net proceeds from the sale of the bond, Nd

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.

QUESTIONS----

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 ___ %

using the bonds's YTM, the after-tax of debt is __ %

c.using the approximation formula, the before tax cost of debt is ___ %

using the approximation formula, the after-tax cost of debt is ___%