Time Warner Shares Have a Market Capitalization of $55 Billion

question 27

Multiple Choice

Time Warner shares have a market capitalization of $55 billion.The company just paid a dividend of $0.35 per share and each share trades for $35.The growth rate in dividends is expected to be 6.5% per year.Also,Time Warner has $20 billion of debt that trades with a yield to maturity of 7%.If the firm's tax rate is 30%,compute the WACC?

• A)6.81%
• B)6.85%
• C)7.45%
• D)7.93%

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Definitions:

Skeletal Traction

A type of medical treatment where force is applied to a bone to correct its position or to allow it to heal properly.

Pins

Small cylindrical objects used to fasten or secure things together.

Pulleys

Simple machines consisting of a wheel with a grooved rim in which a rope or chain can run to change the direction of the force applied to move an object.

Mobility Device

Equipment designed to aid individuals who have difficulty moving independently.