Flotation costs and the cost of debtCurrently, 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 $990 each; Warren will incur flotation costs of $30 per bond. The firm is in the 25% 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.