Apple Enterprises is a publicly traded company. It currently has 10 million shares trading at $12/share and $150 million in book value of equity. The firm also has book value of debt of $ 80 million and market value of debt of $ 75 million. The cost of equity for the company is 9%, the after tax cost of debt is 4% and the marginal tax rate is 40%. What is the cost of capital?

Select one:

a. 7.5%

b. 7.4%

c. 7.0%

d. 6.36%

e. 7.07%

f. 6.6%.