A firms ordinary shares are trading for $15. The next dividend is $1.20 and is expected to grow by 2% in perpetuity. The firm has issued 10 year annual coupon bonds at a semi-annual yield of 5% pa and a coupon rate of 8% pa. The debt-to-equity ratio is 0.8:1. The corporate tax rate is 30%. What is the firm's after-tax WACC as an effective annual rate? Assume a classical tax system.

a.

6.7719%

b.

7.8056%

c.

7.1306%

d.

6.6667%

e.

9.1111%