Estimate the? before-tax and? after-tax costs of debt

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Reference no: EM131616599

Currently, Warren Industries can sell 20-year?, $1,000?-par-value bonds paying annual interest at a 9?% coupon rate. As a result of current interest? rates, the bonds can be sold for $960 each before incurring flotation costs of $35 per bond. The firm is in the 35?% 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.

c. Use the approximation formula to estimate the? before-tax and? after-tax costs of debt.

Reference no: EM131616599

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