Been working on this question for a while and can't figure it out. Any help is greatly appreciated. Thank you!

Following is information about Seasonal Products (SP) Corporation. The company has no preferred stock.

Type ofProportion of the

Type of CapitalAfter-Tax CostCapital Capital Structure

Debt, r_dT 6.5% Debt40.0%

Common equity Equity 60.0

Retained earnings, r_s12.0

New issue, r_e 15.0

The firm expects to retain $300,000 in earnings this year to invest in capital budgeting projects. If the SP's capital budget is expected to equal $550,000, what required rate of return, or marginal cost of capital, should be used when evaluating capital budgeting projects?

9.80%

11.60%

9.25%

11.17%

9.90%