Currently, Warren Industries can sell

15-year, $1,000-par-value bonds paying annual interest at a 15% coupon rate. As a result of current interest rates, the bonds can be sold for $1,060 each before incurring flotation costs of $35per bond. The firm is in the 30% 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.