Sorensen Systems Inc. is expected to pay a $1.50 dividend at year end (D₁ = $1.50), the dividend is expected to grow at a constant rate of 7.00% a year, and the common stock currently sells for $35.00 a share. The before-tax cost of debt is 9.50%, and the tax rate is 25%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity used is from retained earnings? Do not round your intermediate calculations.

a. 9.41%

b. 7.86%

c. 9.00%

d. 9.21%

e. 9.58