Question
GenuinelCare is a company that offers residential health care services. The company has $150 million in interest-bearing debt (in book value and market value terms).
GenuinelCare is a company that offers residential health care services. The company has $150 million in interest-bearing debt (in book value and market value terms). The firm has 25 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 0.07 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.
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