Given the following information on S&G Inc.'s capital structure, computer the company's weighted average cost of capital.

Type of capital ---------------- Percent of Capital Structure ------------ BeforeTax Component Cost

Bonds ----------------------------------40%--------------------------------------------------7.5%

Preferred Stock ----------------------5%---------------------------------------------------11%

Common Stock ---------------------55%-------------------------------------------------15%

(internal only)

The Company's marginal tax rate is 40%

A. 10.6%

B. 10%

C. 7.1%

D 13.3%