What is the firms corporate cost of capital?
Morningside Nursing Home a not-for-profit corporation is estimating its corporate cost of capital. Show more Morningside Nursing Home a not-for-profit corporation is estimating its corporate cost of capital. Its tax-exempt debt currently requires an interest rate of 6.2 percent and its target capital structure calls for 60 percent debt financing and 40 percent equity (fund capital) financing. The estimated costs of equity for selected investor-owned healthcare companies are as follows: GlaxoSmithKline 15.0% Long-Term Care Corporation 16.4 HEALTHSOUTH 17.4 Humana 18.8 a. What is the best estimate for Morningsides cost of equity? b. What is the firms corporate cost of capital?
Please show specific steps to calculating this problem. Show lessMorningside Nursing Home a not-for-profit corporation is estimating its corporate cost of capital. Show more Morningside Nursing Home a not-for-profit corporation is estimating its corporate cost of capital. Its tax-exempt debt currently requires an interest rate of 6.2 percent and its target capital structure calls for 60 percent debt financing and 40 percent equity (fund capital) financing. The estimated costs of equity for selected investor-owned healthcare companies are as follows: GlaxoSmithKline 15.0% Long-Term Care Corporation 16.4 HEALTHSOUTH 17.4 Humana 18.8 a. What is the best estimate for Morningsides cost of equity? b. What is the firms corporate cost of capital? Please show specific steps to calculating this problem. Show less
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