Question $17$

Flotation costs and the cost of debt Currently, Warren Industries can sell $15-$year, $$1,000-$par$-$value bonds paying annual interest at a $9\%$ coupon rate. Because current market rates for similar bonds are just under $9\%,$ Warren can sell its bonds for $$1,050$ each; Warren will incur flotation costs of $$20$ per bond. The firm is in the $28\%$ tax bracket.

a$.$ Find the net proceeds from the sale of the bond, $N_d.$

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

a$.$ The net proceeds from the sale of the bond, $N_d,$ is $ $($Round to the nearest dollar.$)$

Question $19$

Retained earnings versus new common stock Using the data for a firm shown in the following table, calculate the cost of retained earnings and the cost of new common stock using the constant$-$growth valuation model. $($Click on the icon here in order to copy the contents of the data table below into a spreadsheet.$)$

$\backslash$table$[[\backslash$table$[[$Current market$],[$price per share$]],\backslash$table$[[$Dividend$],[$growth rate$]],\backslash$table$[[$Projected$],[$dividend per$],[$share next year$]],\backslash$table$[[$Underpricing$],[$per share$]],\backslash$table$[[$Flotation cost$],[$per share$]]],[$$$58\mathrm{.}00,7\%,$$$2\mathrm{.}90,$$$1\mathrm{.}50,$$$2\mathrm{.}25$