Morningside Nursing Home, a not-for-profit corporation,

 
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Morningside Nursing Home, a not-for-profit corporation, is estimating its corporate cost of capital. 

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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 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 investor-owned healthcare companies are as follows:

GlaxoSmithKline15.0%
Long-Term Care Corporation16.4
HEALTHSOUTH17.4
Humana18.8

a. What is the best estimate for MorningsideA????1s cost of equity?

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

Please show specific steps to calculating this problem.

 
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