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?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Transcribed Image Text: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:
| Company | 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?**
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