apple Inc. is a company that derives equal portions of its revenues from the telecom and entertainment businesses. The company has targeted a debt to capital ratio of 80% for the firm and an after-tax cost of debt of 3%. The beta for the entertainment business is 0.80 and the beta for telecom business is 1.20 ; the risk free rate in US dollars is 2.5% and the equity risk premium is 5%. apple is considering a new project in the entertainment business that will be funded entirely with debt. What cost of capital should you use in assessing this project?

Select one:

a. 5.80%

b. 8.50%

c. 6.60%

d. 7.40%

e. 3.70%