A Firm Plans to Raise $4 Million by Borrowing at an Interest

A firm plans to raise $4 million by borrowing at an interest rate of 16 percent and to raise $1 million by issuing common stock. The firm's stock has a beta coefficient of 2, the risk-free interest rate is 6 percent, the average rate of return on stocks is 9 percent, and the marginal tax rate is 25 percent. What is the firm's cost of equity capital?

A) 9 percent
B) 12 percent
C) 15 percent
D) 18 percent