Analysts expect the Rumpel Felt Company to generate EBIT of $20 million annually in perpetuity (starting in one year). Rumpel is all-equity financed and its stockholders require a return of 7%. The value of Rumpel is $286 million. If Rumple borrows $80 million with a cost of debt of 3%, then what will the companys WACC be? (Assume that the borrowed money is used to repurchase shares and Rumpel operates in Utopia where corporate taxes are zero.)

a. 7%

b. 5%

c. 8%

d. 6%