In: Finance
Cost of debt using both methods (YTM and the approximation formula) Currently, Warren Industries can sell 15 dash year $1,000 -par-value bonds paying annual interest at a 11% coupon rate. As a result of current interest rates, the bonds can be sold for $1,100 each before incurring flotation costs of $30 per bond. The firm is in the 40% tax bracket. a. Find the net proceeds from the sale of the bond, Upper N d
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,
Upper N d is