Time Warner shares have a market capitalization of $40 billion. The company is expected to...
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Time Warner shares have a market capitalization of $40 billion. The company is expected to pay a dividend of $0.30 per share and each share trades for $30. The growth rate in dividends is expected to be 6% per year. Also, Time Warner has $10 billion of debt that trades with a yield to maturity of 9%. If the firm's tax rate is 25%, what is the WACC?
Answer: 6.95%. Please show how to arrive at this answer.
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