Best estimate for morningside cost of equity

Reference no: EM1336753

Please help with this problem:

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% and its capital structure calls for 60% debt financing and 40% equity (fund capital) financing. The estimated costs of equity for selected investor-owned healthcare companies are given below:

Glaxo Wellcome 15.0%

Beverly Enterprises 16.4

Healthsouth 17.4

Humana 18.8

a. What is the best estimate for Morningside's cost of equity?

b. What is the firm's corporate cost of capital?

Reference no: EM1336753

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