An all-equity corporation has an expected EBIT of $900,000, which it expects to earn in perpetuity. The corporate tax rate is 35%. The companys unlevered cost of equity is 10% and the cost of debt is 8%. The company is planning on issuing $4 million of debt and using the proceeds to buy back its shares at the current market value. Assuming that there are no other market imperfections other than taxes, what will be the WACC after the restructuring is completed.

1. 7.57%

2. 8.03%

3. 8.46%

4. 9.15%

5. 8.77%