16) You have recently been hired by Steel Ltd as a consultant to estimate the firms weighted average cost of capital (WACC). Steels only long-term debt is a long-term bank loan carrying an interest rate of 7%. The companys tax rate is 30%. The risk-free rate is 4%, the market risk premium is 5.4%, and the beta of Steels ordinary shares is 1.2. The target capital structure consists of 28% debt and the balance as ordinary share equity. Steel uses the CAPM to estimate the cost of equity and it does not expect to issue any new ordinary shares. What is the firms WACC? Select one:

a. 7.88%

b. 6.57%

c. 11.79%

d. 8.92%

e. 10.48%