Net proceeds, Before and after-tax debt 2. Currently, Warren Industries can...
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Net proceeds, Before and after-tax debt
2. Currently, Warren Industries can sell 16-year, $1,000-par-value bonds paying annual interest at a 9% coupon rate. Because current market rates for similar bonds are just under 9%, Warren can sell its bonds for $1,070 each; Warren will incur flotation costs of $45 per bond. The firm is in the 10% tax bracket. Find the net proceeds from the sale of the bond. Calculate the before-tax and after-tax costs of debt
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