Currently, Warren Industries can sell 20-year,$1000 par-value bonds paying annual interest at a 9% coupon...
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Finance
Currently, Warren Industries can sell 20-year,$1000 par-value bonds paying annual interest at a 9%
coupon rate. As a result of current interest rates, the bonds can be sold for $990 each before incurring flotation costs of $35
per bond. The firm is in the 30% tax bracket.
a.Find the net proceeds from the sale of the bond= _________.
b.Calculate the bond's yield to maturity (YTM) to estimate the before-tax and after-tax costs of debt.
Before tax cost debt= _________.
After- Tax cost debt=_______.
c.Use the approximation formula to estimate the before-tax and after-tax costs of debt.
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