Having successfully issued their preference shares, United Corp. is seeking to determine its Weighted Average Cost of Capital, so that it can be used as the companys required return in evaluating upcoming capital projects.

Utilising information from United Corp.s financial statements, presented on page 1, together with current information, the company has the following capital structure:

Debt:	Bonds outstanding has a face value of $75,000,000, currently selling at 110% of par. The coupon rate on these bonds is 8% and there is 15 years left to maturity. (Hint: you can use the lowest multiple of $1,000 for the YTM calculation only)
Common stock:	120,000,000 shares of common stock outstanding with a market price of $20.00.
Preferred stock:	10,000,000 shares of preferred shares outstanding with a market price of $52.63. The annual dividend is $5.00.

Additional Information:

• The Companys tax rate is 35%.
• The current risk free rate is 3.50%; market return is 10%. The Companys beta is 1.40.

Required: Calculate the Weighted Average Cost of Capital for United Corporation Limited.

(20 Marks)

CASE ANALYSIS - UNITED CORPORATION LIMITED 140 MARKS The following comprehensive assessment is based on a continuing case study of United Corporation Limited. The following financial statements have been provided: United Corporation Limited Income Statement For the years ended December 31, 2018 & 2019 2018 2019 ('000s) ('000s) Sales 750,000 937.500 Cost of Sales (250,000) (255,500) Selling & Marketing Costs (125,000) (130,000) Admin. Expenses (45,000) (47,500) Depreciation Expense (15,000) (17.500) Earnings before Interest & Taxes 315.000 487.000 Interest Expense (2,500) (2.500) Taxable income 312,500 484,500 Taxation (35%) (109.3751 (169,575) Net Income 203 125 314,925 Dividends (40%) 81,250 125,970 Addition to Retained Earnings 121,875 188,955 Additional Information: Ordinary Share Price 17.50 22.75 Ordinary Shares Outstanding ('000) 100,000 120,000 United Corporation Limited Statement of Financial Position As at December 31, 2018 & 2019 2018 2019 2018 2019 ("000s) ('000) ('000) {"000s) ASSETS LIABILITIES & EQUITY Current Assets Current Liabilities Inventories 220,000 230,000 Accounts Payables 115,000 95,000 Accounts Receivables 245,000 275,000 Notes Payables 125,750 110,545 Cash & Equivalents 175,750 225,000 240,750 205,545 640,750 730,000 Non-current Liabilites 100.000 75,000 Non Current Assets, Net 525,500 575,000 Total Liabilities 340,750 280,545 Equity Common Stock Retained Earnings Total Equity TOTAL LIAB. & EQUITY 220,000 605 500 825,500 230,000 794 455 1,024,455 TOTAL ASSETS 1,166,250 1,305,000 1,166,250 1,305,000 CASE ANALYSIS - UNITED CORPORATION LIMITED 140 MARKS The following comprehensive assessment is based on a continuing case study of United Corporation Limited. The following financial statements have been provided: United Corporation Limited Income Statement For the years ended December 31, 2018 & 2019 2018 2019 ('000s) ('000s) Sales 750,000 937.500 Cost of Sales (250,000) (255,500) Selling & Marketing Costs (125,000) (130,000) Admin. Expenses (45,000) (47,500) Depreciation Expense (15,000) (17.500) Earnings before Interest & Taxes 315.000 487.000 Interest Expense (2,500) (2.500) Taxable income 312,500 484,500 Taxation (35%) (109.3751 (169,575) Net Income 203 125 314,925 Dividends (40%) 81,250 125,970 Addition to Retained Earnings 121,875 188,955 Additional Information: Ordinary Share Price 17.50 22.75 Ordinary Shares Outstanding ('000) 100,000 120,000 United Corporation Limited Statement of Financial Position As at December 31, 2018 & 2019 2018 2019 2018 2019 ("000s) ('000) ('000) {"000s) ASSETS LIABILITIES & EQUITY Current Assets Current Liabilities Inventories 220,000 230,000 Accounts Payables 115,000 95,000 Accounts Receivables 245,000 275,000 Notes Payables 125,750 110,545 Cash & Equivalents 175,750 225,000 240,750 205,545 640,750 730,000 Non-current Liabilites 100.000 75,000 Non Current Assets, Net 525,500 575,000 Total Liabilities 340,750 280,545 Equity Common Stock Retained Earnings Total Equity TOTAL LIAB. & EQUITY 220,000 605 500 825,500 230,000 794 455 1,024,455 TOTAL ASSETS 1,166,250 1,305,000 1,166,250 1,305,000