As the book mentions interest rates influence the cost of all capital and there are several factors that influence general interest rates. One of the factors the book didn’t mention is the decisions of the Federal Reserve Open-Market Committee (FOMC) of the Federal Reserve Bank. The FOMC controls monetary policy, specifically the discount rate.
Since the great recession of 2007-2008, the FOMC has held the rate at almost zero until recently. The Fed has indicated that it is likely it will raise the discount rate a couple of times in the next one year depending on the economic performance. Assume you were advising a midsized (350 beds) hospital board on capital expenditures such as replacing an aging plant, would you recommend getting credit to replace the building now or wait? Why or why not? Also, assume the hospital is financially stable and it has enough funds in its sinking fund to pay interest and part of the principal for several years into the future. The hospital also has AAA rating from Fitch, Aa from Moody’s and AA from S&P.
Further, what debt instrument would you suggest a hospital use if you were advising them to get the credit now? Why this particular debt instrument?