1. Suppose the total dollar amount of a for profit hosptal is 0.75 capital and 0.25 debt. Assume the stockholders are receiving 10% in return while the creditors are getting 8%.
a. What is the corporate cost of capital of this hospital?
b. What would be the corporate cost of capital at 40% tax?
2. Which of the following is a characteristic of beta?
a. Beta measures only the volatility of returns on an individual bond relative to a bond market index.
b. A beta of 1.0 has zero risk.
c. A beta of less than 1.0 has less risk than the market.
d. A beta is always equal to 1.0.