We are analyzing Hogwarts and Wizarding Equipment Co and we have the following information: 80,000 bonds outstanding that are selling at the market at par (1,000). The YTM of bonds with similar characteristics is 7.5 %. The company also has 2.5 million shares of common stock outstanding. The common stock sells for 42 a share. The stock has a beta of 1.40. The required equity return for the market is 9% and the risk-free rate of return is 1.25% percent. The corporate tax rate is 38%. What is the firm's weighted average cost of capital?

12.10% 10.11%

7.50%

8.88%