Flotation costs and the cost of debtCurrently, Warren Industries can sell 15-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 $960 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, Nd.

b.Calculate the before-tax and after-tax costs of debt.

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Part 1

a.The net proceeds from the sale of the bond, Nd, is $930

930. (Round to the nearest dollar.)

Part 2

b.The before-tax cost of debt is enter your response here

%. (Round to two decimal places.)