Morningview Nursing Home, a not-for-profit corporation, is estimating its CCC (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 cost of equity for selected investor-owned healthcare companies are as follows: Re GlaxoSmithKline 15.00% Long-Term Care Group Inc. 16.40% Encompass Health 17.40% Humana 18.80% (a) What is the best estimate for Morningview's cost of equity? (b) What is the firm's CCC?

Morningview Nursing Home, a not-for-profit corporation, is estimating its CCC (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 cost of equity for selected investor-owned healthcare companies are as follows: Re GlaxoSmithKline 15.00% Long-Term Care Group Inc. 16.40% Encompass Health 17.40% Humana 18.80% (a) What is the best estimate for Morningview's cost of equity? (b) What is the firm's CCC?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 5P

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