Flotation costs and the cost of debt Currently, Warren Industries can sell 10-year, $1,000-par-value bonds paying annual interest at a 9%

coupon rate. Because current market rates for similar bonds are just under 9%, Warren can sell its bonds for $1,040 each; Warren will incur flotation costs of $30 per bond. The firm is in the 24% tax bracket.

Part 1

a. The net proceeds from the sale of the bond, Nd, is

(Round to the nearest dollar.)

Part 2

b. The before-tax cost of debt is

(Round to two decimal places.)

c)The after-tax cost of debt is

(Round to two decimal places.)