Rivers Corp. has a tax rate of 40%. Rivers Corp. debt consists of $200 million of bonds that have a yield to maturity of 12%. Rivers has 10 million shares of common stock outstanding, currently selling at a price of $8 per share. Rivers stock has a beta of 0.85, the current risk-free rate is 3%, and the expected risk premium on the overall market portfolio is 6.5%.

What is Rivers weighted average cost of capital?

a. 7.58%

b. 6.80%

c. 8.10%

d. 6.41%