The correct answer is: (15% x 83%) + (10% x 17%).

This is the best method, using the market values of debt and equity and excluding retained earnings.

(15% x 70%) + (10% x 30%) calculates the WACC on the basis of book values of equity, debt and retained earnings. This can be used, but is not the best method when market values are available.

(15% x 85%) + (10% x 15%) uses the market values of equity and debt and the book value of retained earnings in the weightings. If market values are used, retained earnings should be excluded.

(15% x 62.5%) + (10% x 37.5%) uses the book values of debt and equity and excludes retained earnings. If book values are used, retained earnings should be included.

The use of market values gives a better reflection of the opportunity cost to investors of having their capital invested in this company. The book values - historic, non-inflation-adjusted, accounting-based figures - are less appropriate.