Currently warren industries can sell 20-year 1000-par-value, Ask an Expert

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Currently, Warren Industries can sell 20-year, $1,000-par-value bonds paying annual interest at a 13% coupon rate. As a result of current interest rates, the bonds can be sold for $1,030 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, Nd.

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.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92427374

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