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%

1. What debt and equity weights will United use to calculate WACC?
2. What is Uniteds cost of debt?
3. What is Uniteds cost of common equity?
4. What is Uniteds WACC?