case study 42

1. What would be the cost of equity of Marshland General if its market risk is similar to that of National Health Company, shown in exhibit 22.4. Assume that the risk free rate is the 20 year U.S Treasury yield also given in exhibit 22.4. One difference however is the Marshall General is a non-taxable institution and its debt/asset ratio is .50. (Hint: refer to the Hamada equation given chapter 9.

2. What is the corporate cost of debt of Marshall General if its bond is trading at $920 with a coupon rate of 5% of a par value of $1,000 and a maturity of 20 years?

3. What is Marshall’s corporate cost of capital given the debt/asset ratio given in question 1?

4. What is the value of Marshall’s equity based on the present value of future cash flows (Net income + depreciation) starting in year 2010 if we assume a growth rate of those cash flows to be 5% indefinitely? Assume we are at the end of year 2009 (see figures in exhibit 22.2) and that the cost of equity (discount rate) is the one you calculated in question 1. (Ignore the effect of debt on the cost of equity)

5. If we used the EBITDA market multiple based on that of National Health Company, what would be the value of Marshall if we used the average EBITDA for the period 2005-2009?

please answer this section for the case study 22

 
Looking for solution of this Assignment?

WHY CHOOSE US?

We deliver quality original papers

Our experts write quality original papers using academic databases.  

Free revisions

We offer our clients multiple free revisions just to ensure you get what you want.

Discounted prices

All our prices are discounted which makes it affordable to you. Use code FIRST15 to get your discount

100% originality

We deliver papers that are written from scratch to deliver 100% originality. Our papers are free from plagiarism and NO similarity

On-time delivery

We will deliver your paper on time even on short notice or  short deadline, overnight essay or even an urgent essay