Question: Cost of debt using both methods (YTM and the approximation formula)Currently, Warren Industries can sell 10-year, $1,000-par-value bonds paying annual interest at a 9% coupon

Cost of debt using both methods (YTM and the approximation formula)Currently, Warren Industries can sell 10-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 $30 per bond. The firm is in the 23% 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.

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