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. As a result of current interest rates, the bonds can be sold for $1,040 each before incurring flotation costs of $20 per bond. The firm is in the 40% 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.