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 $1,080 each; Warren will incur flotation costs of $30 per bond. The firm is in the 27% tax bracket.

a.Find the net proceeds from the sale of the bond, N Subscript d (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.