Zonk Corp. The following data pertains to Zonk Corp., a manufacturer of ball bearings (dollar amounts in millions):

Total assets	$7,460
Interest-bearing debt	$3,652
Average pre-tax borrowing cost	10.5%
Common equity:
Book value	$2,950
Market value	$13,685
Income tax rate	35%
Market equity beta	1.13

Assume that Zonk is a potential leveraged buyout candidate. Assume that the buyer intends to put in place a capital structure that has 80 percent debt with a pretax borrowing cost of 14 percent and 20 percent common equity. Compute the weighted average cost of capital for Zonk based on the new capital structure.

a. 9.94%

b. 7.28%

c. 8.94%

d. 7.26%