P79.12, Trumpit Resorts Company currently has 1.2 million common shares of stock outstanding and the stock has a beta of 2.2. It also has $10 million face value of bonds that have 5 years remaining to maturity and 8 percent coupon with semi-annual payments, and are priced to yield 13.65 percent. If Trumpit issues up to $2.5 million of new bonds, the bonds will be priced at par and have a yield of 13.65%; if it issues bonds beyond $2.5 million, the expected yield on the entire issuance will be 16%. Trumpit has learned that it can issue new common stock at $10 a share. The current risk-free rate of interest is 3 percent and the expected market return is 10%. Trumpit's marginal tax rate is 30%. If Trumpit raises $7.5 million of new capital while maintaing the same debt-to-equity ratio, its weighted average of capital is closest to:
A 14.5%
B 15.5%
C 16.5%
