Macarena Ltd. is planning to invest in a two-year project which is expected to generate unlevered after-tax cash flows of $280 million each year. The initial investment is $500 million. The corporate tax rate is 25% and the interest rate of debt is 6%. The unlevered cost of capital is 8%. The target capital structure for this project is two parts of debt to three parts of equity. What is the projects weighted average cost of capital?

Select one:

a. 6.75%.

b. 7.2%.

c. None of THESE are correct.

d. 6.25%

e. 7%.