Question
By definition, the beta of the market is 1. HCA Healthcare, Inc. operates as a health care services company with 182 hospitals, 126 freestanding outpatient
By definition, the beta of the market is 1. HCA Healthcare, Inc. operates as a health care
services company with 182 hospitals, 126 freestanding outpatient surgery centers, and a broad
network of physician offices, urgent care clinics, and freestanding emergency rooms. Yahoo Finance
lists HCA Healthcare, Inc. beta as 1.65.
a. If the risk free rate is assumed to be 5% and the return on the market is assumed to be 10%, what is
HCA Healthcare, Inc. required return for its common shareholders?
b. If the expected return is estimated to be 10% for HCA Healthcare, Inc., is HCA under or overvalued
and what will happen in the marketplace to bring about equilibrium?
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