SIROM Scientific Solutions has

$10

million of outstanding equity and

$5

million of bank debt. The bank debt costs

4%

per year. The estimated equity beta is 2. If the market risk premium is

9%

and the risk-free rate is

3%,

compute the weighted average cost of capital if the firm's tax rate is

35%.

A.

15.61%

B.

16.35%

C.

17.1%

D.

14.87%