Morningside nursing home not-for-profit corporation its tax

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Morningside Nursing Home, a not-for-profit corporation,  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 investors 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: EM13476943

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