Collins Group

The Collins Group, a leading producer of custom automobile accessories, has hired you to estimate the firm's weighted average cost of capital. The balance

sheet and some other information are provided below.

Assets

Current assets

Net plant, property, and equipment

Total assets

Liabilities and Equity.

Accounts payable

$10,000,000$

Accruals

Current liabilities

Long$-$term debt $(40,000$ bonds, $$1,000$ par value$)$

Total liabilities

Common stock shares$)$

$9,000,000$

Retained earnings

Total shareholders' equity

Total liabilities and shareholders' equity

$19,000,000$

$\frac{40,000,000}{559,000,000}$

The stock is currently selling for $$15\mathrm{.}25$ per share, and its noncallable $$1,000$ par value, $20-y$ ear, $7\mathrm{.}25\%$ bonds with semiannual payments are selling for

$$875\mathrm{.}00.$ The beta is $1\mathrm{.}25,$ the yield on a $6-$month Treasury bill is $3\mathrm{.}50\%,$ and the yield on a $20-$year Treasury bond is $5\mathrm{.}50\%.$ The required return on the stock.

market is $11\mathrm{.}50\%,$ but the market has had an average annual return of $14\mathrm{.}50\%$ during the past $5$ years. The firm's tax rate is $25\%.$

Refer to the data for the Collins Group. What is the best estimate of the firm's wACC?

a$.11\mathrm{.}0046$

b$.11\mathrm{.}77\%$

c$.11\mathrm{.}42\%$

$.12\mathrm{.}13\%$

e$.12\mathrm{.}494$