Our firm's capital structure based on book values is $30\%$ debt and $70\%$ equity. The firm's before tax cost of debt is $6\%,$ its cost of equity is $12\%,$ and its tax rate is $20\%.$ Currently, the market value of debt is $$250$ million and the market value of equity is $$750$ million. What would be the firm's weighted average cost of capital $($WACC$)$ based on this information?

$10\mathrm{.}54\%$

We can't calculate WACC till we know the target capital structure.

$9\mathrm{.}90\%$

$9\mathrm{.}84\%$

$10\mathrm{.}20\%$