Paul Jacobs has an advertising firm. He wants to build a new headquarters building. The building will cost $900,000. He will finance 25% of the project himself (the down payment) and use a bank loan to finance the rest at prime plus 1 percent. The prime lending rate is currently 4 percent. Paul will withdraw the money for the down payment from his mutual fund account where he has earned 8 percent for the last five years. What is Paul's weighted average cost of capital?

Group of answer choices

3.75%

5.00%

5.75%

8.00%