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St. Vincent's Hospital has a target capital structure of 35% debt and 65% equity. Its costs of equity estimate is 13.5% and its cost of
St. Vincent's Hospital has a target capital structure of 35% debt and 65% equity. Its costs of equity estimate is 13.5% and its cost of tax-exempt debt estimate is 7%. What is the hospital's corporate cost of capital? Show the formula and your work. Remember that nonprofits do not pay taxes, so the tax rate is zero. As a nonprofit, their cost of debt is also lower than it is for a for-profit company.
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