Sorensen Systems Inc. is expected to pay a $3.60 dividend at year end (D₁ = $3.60), the dividend is expected to grow at a constant rate of 5.00% a year, and the common stock currently sells for $77.50 a share. The before-tax cost of debt is 8.00%, 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. 7.82%

b. 8.13%

c. 6.68%

d. 7.64%

e. 8.00%