Business, 04.04.2020 03:03 XxalyxX3487
Currently, Warren Industries can sell 15-year, $1,000-par-value bonds paying annual interest at a 12% coupon rate. Because current market rates for similar bonds are just under 12%, Warren can sell its bonds for $1 comma 050 each; Warren will incur flotation costs of $20 per bond. The firm is in the 22% tax bracket. A. CalCulate the bond's yield to maturity (YTM) to estimate the before-tax and after- tax cost of debt.
B. Use the approximation formula to estimate the before-tax and after-tax costs of debt.
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