GenuinelCare is a company that offers residential health care services. The company has $250 million in interest-bearing debt (in book value and market value terms). The firm has 20 million shares trading at $ 10 a share, and the unlevered beta of firms in the health care business is 0.6. 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 0.045, the market risk premium is 0.05 and the corporate tax rate is 40%.

Estimate the debt to capital ratio for the firm.

Answer for part 1

Estimate the debt to equity ratio for the firm.

Answer for part 2

What is the beta levered for the firm?

Answer for part 3

Estimate the cost of debt for the firm.Answer for part 4

Estimate the after tax cost of debt for the firm.

Answer for part 5

Estimate the cost of equity for the firm.Answer for part 6

Estimate the cost of capital for the firm.

Answer for part 7