An investor is considering purchasing a four-unit multifamily but is limited on capital. The individual has $125,000 and the purchase price is $625,000. The individual has a commitment from a local lender to fund the difference (assume no transaction costs and/or inefficiencies).

The lender will charge 6.25% interest and the investor can earn 11.00% in the equity market on invested capital. Last year the investor paid 26.5% in federal taxes. What is the investor’s Weighted Average Cost of Capital that should be used to discount the forecasted cash flows for this project?

a) 5.56%

b) 5.73%

c) 6.02%

d) 5.88%