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I need help solving b-c Cost of debt using both methods (YTM and the approximation formula) Currently, Warren Industries can sell 20-year, $1,000-par-value bonds paying
I need help solving b-c
Cost of debt using both methods (YTM and the approximation formula) Currently, Warren Industries can sell 20-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 $1,030 each; Warren will incur flotation costs of $35 per bond. The firm is in the 23% tax bracket. a. Find the net proceeds from the sale of the bond, No. 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. a. The net proceeds from the sale of the bond, Nd, is $ 995. (Round to the nearest dollar.) b. Using the bond's YTM, the before-tax cost of debt is %. (Round to two decimal places.)Step by Step Solution
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