Flagstaff Enterprises is expected to have free cash flow in the coming year of $8 million, and this free cash flow is expected to grow at a rate of 3% per year thereafter. Flagstaff has an equity cost of capital of 13%, a debt cost of capital of 7%, and it is in the 35% corporate tax bracket.

If Flagstaff maintains a .5 debt to equity ratio, then Flagstaff's

preminustax

WACC is closest to:

A.

11.0%

B.

10.0%

C.

9.0%

D.

10.5%