Neptune, Co. (NP) has 33 million common shares outstanding that currently trade at $80 per share. The company also has $800 million worth of outstanding bonds with a yield to maturity of 5.5%. The estimated standard deviation of NPs stock return is 50%, the estimated standard deviation of S&P 500 index is 25%, and the correlation between the NPs stock and the S&P 500 is 1.6. If the market risk premium is 6%, the risk-free rate is 1% and the firm's tax rate is 35%, compute the weighted average cost of capital (WACC).

• A.

  5.85%

• B.

  8.97%

• C.

  5%

• D.

  6.82%

• E.

  10.72%