SIROM Scientific Solutions has

$5

million of outstanding equity and

$10

million of bank debt. The bank debt costs

5%

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

7%

and the risk-free rate is

3%,

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

40%.

A.

7.67%

B.

8.82%

C.

8.05%

D.

8.43%