Assume that XYZ Corporation is a leveraged company with the following information: PLEASE EXPLAIN ANSWER!

Cost of equity capital for XYZ = 10%

Before-tax borrowing cost = 6%

Marginal corporate income tax rate = 30%

Calculate the debt-to-total-market-value ratio that would result in XYZ having a weighted average cost of capital of 8%.

1. 42.37%
2. 45.54%
3. 36.36%
4. 51.23%