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Cases in Healthcare Finance, Case 18

6. One of Southeasterns directors has expressed concern over the difference between the companys target capital structure and the current structure as reported on the balance sheet.

6.a. What are the book values of Southeasterns long-term debt and equity? What are the current market values of Southeasterns long-term debt and equity?

6.b. What are Southeasterns target weights, book value weights, and current market value weights of long-term debt and equity (that is, long-term debt / total capital and common stock / total capital)?

6.c. Which set of weights should be used in the corporate cost of capital estimate? Why?

SOUTHEASTERN HOMECARE 8 SOUTHEASTERN HOMECARE 8