P9-2: cost of debt using both methods currently, warren industries can sell 15-year, $1,000-par-value bonds paying annual interest at a 7% coupon rate. because cur-rent market rates for similar bonds are just under 7%, warren can sell its bonds for $1,010 each; warren will incur flotation costs of $30 per bond in this process. the firm is in the 40% tax bracket. a. find the net proceeds from sale of the bond, nd. b. show the cash flows from the firm’s point of view over the maturity of the bond. c. calculate the before-tax and after-tax costs of debt. d. use the approximation formula to estimate the before-tax and after-tax costs of debt. e. compare and contrast the costs of debt calculated in parts c and d. which approach do you prefer? why?

Asmall town wants to build some new recreational facilities. the proposed facilities include a swimming pool, recreation center, basketball court and baseball field. the town council wants to provide the facilities which will be used by the most people, but they face budget and land limitations. the town has $400,000 and 14 acres of land. the pool requires locker facilities which would be in the recreation center, so if the swimming pool is built the recreation center must also be built. also, the council has only enough flat land to build the basketball court or the baseball field. the daily usage and cost of the facilities (in $1,000) are shown below. which facilities should they build? facilityusagecost ($1,000)landswimming pool4001002recreation center5002003basketball court3001504baseball field2001005