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March 28, 2015

Homework Help: Paine College

Posted by Lisa on Tuesday, August 10, 2010 at 3:43pm.

Morningside Nursing Home, a not-for-profit corporation, is estimating its corporate cost of capital. Its tax-exempt debt currently requries an interst rate of 6.2 percent and its target capital structure calls for 60 percent debt fianancing and 40 percent equity (fund capital) financing. The estimated costs of equity for selected investor-owned healthcare comapnies are given below:

Glaxo Wellcome 15.0%
Beverly Enterprises 16.4
HealthSouth 17.4
Humana 18.8
1. What is the best estimate for Morningside's cost of equity?

2. what is the firm's corporate cost of capital?

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