Sam Jones Has an Engineering Firm

Sam Jones has an engineering firm.He wants to build a new headquarters building.The building will cost $1,500,000.He will put down $1,050,000 and have a bank finance the remainder at prime plus 2 percent.The prime lending rate is currently 8.5 percent.Sam will withdraw the money for the down payment from his mutual fund account where he has earned 13% for the last ten years.What is Sam's weighted average cost of capital?

A) 11.25%
B) 12.25%
C) 10.5%
D) 8) 5%