Flotation costs and the cost of debt Currently, Warren Industries can sell 15-year, $1,000-par-value bonds paying annual interest at a 12% coupon rate. Because current market rate for similar bonds are just under 12%, Warren can sell its bonds for $1,050 each; Warren will incur flotation costs of $30 per bond. The firm is in the 24% tax bracket. a. Find the net proceeds from the sale of the bond, Nd. b. Calculate the before-tax and after-tax costs of debt. ... a. The net proceeds from the sale of the bond, Nd, is $ 1020. (Round to the nearest dollar.) b. The before-tax cost of debt is %. (Round to two decimal places.)

Flotation costs and the cost of debt Currently, Warren Industries can sell 15-year, $1,000-par-value bonds paying annual interest at a 12% coupon rate. Because current market rate for similar bonds are just under 12%, Warren can sell its bonds for $1,050 each; Warren will incur flotation costs of $30 per bond. The firm is in the 24% tax bracket. a. Find the net proceeds from the sale of the bond, Nd. b. Calculate the before-tax and after-tax costs of debt. ... a. The net proceeds from the sale of the bond, Nd, is $ 1020. (Round to the nearest dollar.) b. The before-tax cost of debt is %. (Round to two decimal places.)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 14P

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