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Question 1 40 points Save Answer Morgan is the CEO of Healthcare Solutions Corporation (HSC), a hospital group with facilities throughout the western United States. The firm owns hospitals, medical research facilities, and many healthcare buildings used for medical groups in major markets. HSC has the following capital structure: Bonds: Nine years ago, the firm issued 25-year bonds with a face value of $735 million. These 8.7% coupon rate bonds pay interest semiannually. Today they have a yield to maturity of 7.65%. When they were originally issued, they traded at 113.349. Common Stock: The firm has 23 million common shares outstanding. They have a book value of $8.10. When they were issued, they initially traded at $14. The firm recently paid a dividend of $12.50 per share, and the dividends are expected to grow 8.65% annually. The firm's beta is 1.78. Calculate CAPM to find the expected return before valuing these shares. Preferred shares: The firm also has 7.4 million 14.6% preferred shares outstanding, though the dividend yield on these shares is only 12.3%. They have a par value of $100. Other information: the current yield to maturity on one-year T-Bills is 4.5%. The current market return is 15.6%. HSC's corporate tax rate is 34%. INSTRUCTIONS: Write all dollar amounts out to the penny, with no dollar sign: 1000.00, except for bond quotes, which should be entered all the way out to the furthest decimal. Write out all interest rates as follows: 11.28 (no percent sign) = For this problem: Cost of debt/yield to maturity Cost of equity Cost of preferred Debt Capitalization = Market Capitalization = Preferred Capitalization Enterprise Value = WACC = Question 1 40 points Save Answer Morgan is the CEO of Healthcare Solutions Corporation (HSC), a hospital group with facilities throughout the western United States. The firm owns hospitals, medical research facilities, and many healthcare buildings used for medical groups in major markets. HSC has the following capital structure: Bonds: Nine years ago, the firm issued 25-year bonds with a face value of $735 million. These 8.7% coupon rate bonds pay interest semiannually. Today they have a yield to maturity of 7.65%. When they were originally issued, they traded at 113.349. Common Stock: The firm has 23 million common shares outstanding. They have a book value of $8.10. When they were issued, they initially traded at $14. The firm recently paid a dividend of $12.50 per share, and the dividends are expected to grow 8.65% annually. The firm's beta is 1.78. Calculate CAPM to find the expected return before valuing these shares. Preferred shares: The firm also has 7.4 million 14.6% preferred shares outstanding, though the dividend yield on these shares is only 12.3%. They have a par value of $100. Other information: the current yield to maturity on one-year T-Bills is 4.5%. The current market return is 15.6%. HSC's corporate tax rate is 34%. INSTRUCTIONS: Write all dollar amounts out to the penny, with no dollar sign: 1000.00, except for bond quotes, which should be entered all the way out to the furthest decimal. Write out all interest rates as follows: 11.28 (no percent sign) = For this problem: Cost of debt/yield to maturity Cost of equity Cost of preferred Debt Capitalization = Market Capitalization = Preferred Capitalization Enterprise Value = WACC =