Compute the wacc-time warner

Question

Problem:

Time Warner shares have a market capitalization of 55billion. The company just paid a dividend of 35cents per share and each share trades for 35dollars. The growth rate in dividends is expected to be 6.5% per year. Also, Time Warner has 20billion dollars of debt that trades with a yield to maturity of 7%.

Requirement:

Question: If the firm's tax rate is 30%, compute the WACC.

• 6.81
• 6.85
• 7.45
• 7.93
• 8.19

Note: Provide support for rationale.