Exhibit 11 The Stock Is Currently Selling for $15

Exhibit 11.1
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.
$\begin{array}{c}\begin{array}{lll} \underline{ \text {Assets}}\\ \text {Current assets}\\ \text {Net plant, property, and equipment }\\\text {Total assets}\\\\\underline{ \text {Liabilities and Equity}}\\ \text {Accounts payable}\\ \text {Accruals}\\ \text {Current liabilities}\\ \text {Long-term debt ( 40,000 bonds, \$ 1,000 par value) }\\ \text {Total liabilities}\\ \text {Common stock ( 10,000,000 shares) }\\ \text {Retained earnings}\\ \text {Total shareholders' equity}\\ \text {Total liabilities and shareholders' equity} \end{array}\begin{array}{r}\$ 38,000,000 \\101,000,000 \\\underline{\$ 139,000,000} \\\\ \$ 10,000,000 \\9,000,000 \\\$ 19,000,000 \\\underline{40,000,000} \\\underline{ \$ 59,000,000} \\30,000,000 \\50,000,000 \\\underline{80,000,000} \\\underline{ \$ 139,000,000}\end{array}\end{array}$

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%.
-Refer to Exhibit 11.1.Which of the following is the best estimate for the weight of debt for use in calculating the firm's WACC?

A) 18.67%
B) 19.60%
C) 20.58%
D) 21.61%
E) 22.69%