United Airlines is considering adding a new hub operation in Blue Lagoon. The finance group at UAL
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United Airlines is considering adding a new hub operation in Blue Lagoon. The finance group at UAL has gathered the following data. They have hired you as a Finance consultant to help them determine their cost of capital. (Show Work)
- Total Enterprise Value is $27 billion
- Current stock market capitalization in $9 billion, shares are trading at $25
- Debt was issued with a 4% coupon, and matures in 7 years
- Bonds similar to Uniteds existing debt are current trading at 98.5
- UAL pays a quarterly dividend of $.60, up from $.50 five years ago
- The current risk free rate is 1.5%, UALs Beta is 1.5, the market premium is 7%
- UAL pays a corporate tax rate of 21%
- What debt and equity weights will United use to calculate WACC?
- What is Uniteds cost of debt?
- What is Uniteds cost of common equity?
- What is Uniteds WACC?
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