Bob's Mill Co. has 80,000 bonds outstanding that are selling at face value of $1,000. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. Treasury bill is yielding 4% and the market risk premium is 8%. Bob's tax rate is 35%. What is Bob's weighted average cost of capital?

A.11.37%

B.7.39%

C.10.65%

D.7.10%

E.10.38%