Sorensen Systems Inc. is expected to pay a $3.00 dividend at year end (D₁ = $3.00), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $45.00 a share. The before-tax cost of debt is 8.50%, 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. 7.89%

b. 9.27%

c. 9.76%

d. 9.56%

e. 8.98%