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. (20 year T-bond and the required return of stock market.

Assets

Current assets $ 38,000,000

Net plant, property, and equipment 101,000,000

Total assets $139,000,000

Liabilities and Equity

Accounts payable $ 10,000,000

Accruals 9,000,000

Current liabilities $ 19,000,000

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

Total liabilities $ 59,000,000

Common stock (10,000,000 shares) 30,000,000

Retained earnings 50,000,000

Total shareholders' equity 80,000,000

Total liabilities and shareholders' equity $139,000,000

The stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 40%. Calculate the WACC.

When calculate the cost of equity, use the the yield on 20 year T-bond and the required return of stock market.