Golden State Home Health, Inc., is a large, California-based for-profit home health agency. Its dividends are expected to grow at a constant rate of 5% per year into the forseeable future. The firm’s last divident (Do) was $1, and its current stock price is $10. The firm’s beta coefficient is 1.2; the rate of return on on 20-year T-bonds currently is 8%; and the expected rate of return on the market, as reported by a large financial services firm, is 14%. Golden State’s target capital structure calls fpr 60% debt financing, the interest rate required on its new debt is 9%, and the firm’s tax rate is 30%. ,,What is the firm’s cost of equity estimate according to the DCF method? , ,What is the firm’s cost of equity according to the CAPM? ,On the basis of your answers to parts a and b, what would be your final estimate ,for the firm’s cost of equity? , ,What is your estimate for the firm’s corporate cost of capital? , ,
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