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

$30.

The growth rate in dividends is expected to be

7%

per year. Also, Time Warner has

$15

billion of debt that trades with a yield to maturity of

9%.

If the firm's tax rate is

35%,

what is the WACC?

A.

6.93%

B.

6.2%

C.

8.02%

D.

7.29%