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Cost of debt using both methods (YTM and the approximation formula) Currently, Warren Industries can sell 10-year $1.000 par-value bonds paying annual interest at a
Cost of debt using both methods (YTM and the approximation formula) Currently, Warren Industries can sell 10-year $1.000 par-value bonds paying annual interest at a 14% coupon rate. Because current market rates for similar bonds are just under 14%. Warren can sell its bonds for $1,060 each: Warren will incur flotation costs of 520 per bond. The firm is in the 25% 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 not proceeds from the sale of the bond, Na, is $(Round to the nearest dollar)
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