1. Assume Time Warner shares have a market capitalization of $40 billion. The company is expected to pay a dividend of $0.25 per share and each share trades for $40. The growth rate in dividends is expected to be 7% per year. Also, Time Warner has $20 billion of debt that trades with a yield to maturity of 9%. If the firm's tax rate is 40%, what is the WACC?

Here are the probability distributions for three investment project returns: | Up (prob = 0.4) Down (prob = 0.6) 5% -2% -2.5% 3% 14% -8% X