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Genuine Care is a company that offers health care services. The company has $150 million in interest-bearing debt (in book value and market value terms).
Genuine Care is a company that offers health care services. The company has $150 million in interest-bearing debt (in book value and market value terms). The firm has 26 million shares trading at $ 12 a share, and the unlevered beta of comparable firms in the health care business is 0.75. The firm has a current rating of B, with a default spread of 0.05 over the risk-free rate. The risk-free rate is 0.035, the equity risk premium is 0.04 and the corporate tax rate is 40%. What is the levered beta for the firm? Estimate the cost of equity for the firm. Estimate the before-tax cost of debt for the firm. Estimate the after-tax cost of debt for the firm. What is the market value weight of debt? What is the market value weight of equity? Estimate the cost of capital for the firm
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