Assume that a firms after-tax cost of debt is 6%, its cost of preferred stock a 9%, and its cost of equity capital is 12%. A firm wants to invest $500,000 in a project. To finance the project, the firm plans to raise $200,000 by selling bonds, $150,000 by selling preferred stock, and $150,000 by retaining earnings. What is the firms weighted average cost of capital (WACC)?

8%

9%

7.74%

8.7%