Flotation costs and the cost of debt Currently, Warren Industries can sell 10-year, $1,000-par-value bonds paying...

  

 

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Flotation costs and the cost of debt Currently, Warren Industries can sell 10-year, $1,000-par-value bonds paying annual interest at a 14% coupon rate. Because current market rates for similar bonds are just under 14%, Warren can sell its bonds for $980 each; Warren will incur flotation costs of $30 per bond. The firm is in the 21% tax bracket. a. Find the net proceeds from the sale of the bond, Nd- b. Calculate the before-tax and after-tax costs of debt. a. The net proceeds from the sale of the bond, Nd, is $. (Round to the nearest dollar.) b. The before-tax cost of debt is %. (Round to two decimal places.) The after-tax cost of debt is %. (Round to two decimal places.) Flotation costs and the cost of debt Currently, Warren Industries can sell 10-year, $1,000-par-value bonds paying annual interest at a 14% coupon rate. Because current market rates for similar bonds are just under 14%, Warren can sell its bonds for $980 each; Warren will incur flotation costs of $30 per bond. The firm is in the 21% tax bracket. a. Find the net proceeds from the sale of the bond, Nd- b. Calculate the before-tax and after-tax costs of debt. a. The net proceeds from the sale of the bond, Nd, is $. (Round to the nearest dollar.) b. The before-tax cost of debt is %. (Round to two decimal places.) The after-tax cost of debt is %. (Round to two decimal places.)

Answer rating: 100% (QA)

a Net Proceeds from the Sale of the Bond Nd Net proceeds from the sale of the bond can be calculated ... View the full answer