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Homework: Chapter 9 Homework Save HW Score: 89.09%, 9.8 of 11 pts Score: 0.8 of 1 pt 2 of 11 (10 complete) P9-2 (similar to) 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 $980 each; Warren will incur flotation costs of $25 per bond. The firm is in the 23% tax bracket. a. Find the net proceeds from the sale of the bond, N- 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, N, is $ 955 (Round to the nearest dollar.) b. Using the bond's YTM, the before-tax cost of debt is 8.47%. (Round to two decimal places.) Using the bond's YTM, the after-tax cost of debt is 6.52% (Round to two decimal places.) c. Using the approximation formula, the before-tax cost of debt is 8.41 % (Round to two decimal places.) Using the approximation formula, the after-tax cost of debt is 6.48 %. (Round to two decimal places.) Question is complete. Tap on the red indicators to see incorrect answers. ? All parts showing Similar

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