Sonic needs to purchase equipment for its drive-ins nationwide. The total cost of the equipment is $2 million. It is estimated that the after-tax cash inflows from the project will be $210,000 annually in perpetuity. The market value debt-to-assets ratio is 40%. The firm's cost of equity is 13%, its pre-tax cost of debt is 8%, and the flotation costs of debt and equity are 2% and 8%, respectively. The tax rate is 37.5%. The project is similar to the firm's existing operations. When applicable, round all answers to the nearest dollar or tenths of a percent. What is the weighted average cost of capital?

A.

6.9 %

B.

8.7 %

C.

8.9 %

D.

9.8 %

E.	None of the Above