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 7% coupon rate. Because current market rates for similar bonds are just under 7%, Warren can sell its bonds for $1,070

each; Warren will incur flotation costs of $25 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 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.

These are the questions asked

a. The net proceeds from the sale of the bond, is_$

b.Using the bond's YTM, the before-tax cost of debt is _%.

Using the bond's YTM, the after-tax cost of debt is_%

c.Using the approximation formula, the before-tax cost of debt is _%

Using the two decimal places approximation formula, the after-tax cost of debt is _%.