Time Warner shares have a market capitalization of

$60

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

6%

per year. Also, Time Warner has

$20

billion of debt that trades with a yield to maturity of

8%.

If the firm's tax rate is

30%,

what is the WACC?

A.

7.01%

B.

6.05%

C.

5.41%

D.

6.37%