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

8%

coupon rate. Because current market rates for similar bonds are just under

8%,

Warren can sell its bonds for

$1,040

each; Warren will incur flotation costs of

$20

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.

P9-2 (similar to) is Question Help 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 8% coupon rate. Because current market rates for similar bonds are just under 8%, Warren can sell its bonds for $1,040 each; Warren will incur flotation costs of $20 per bond. The firm is in the 25% 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, Ng, is $. (Round to the nearest dollar.)