Teak Corporation is considering an investment project. The company plans to finance the project with debt and equity so that the ratio of debt to total firm value is 0.40 (hence the ratio of equity to total firm value is 0.60). The cost of equity is 11%, the pretax cost of debt is 6.5%, and the tax rate is 25%. Assuming average risk, what is the appropriate discount rate?

A. 7.75%

B. 7.95%

C. 8.15%

D. 8.35%

E. 8.55%