Bay Beach Industries wants to maintain their capital structure of 40% debt and 60% equity.The firm's tax rate is 34%.The firm can issue the following securities to finance the investments:

Bonds: Mortgage bonds can be issued at a pre-tax cost of 9 percent.Debentures can be issued at a pre-tax cost of 10.5 percent.

Common Equity: Some retained earnings will be available for investment.In addition, new common stock can be issued at the market price of $46.Flotation costs will be $3 per share.The recent common stock dividend was $3.60.Dividends are expected to grow at 6% in the future.

What is the cost of capital using mortgage bonds and internal equity?

Group of answer choices

13.12%

11.69%

11.30%

10.96%

11.35%