A firm adopted major improvements to financial disclosure in its last annual report, including expanded MD&A, expanded information in financial statement notes, and more line items on its income statement. Prior to this improved annual report, the firms cost of capital was 10%. You advised the firm on these improvements, and the firm has now asked you if its cost of capital has declined as a result. The risk-free interest rate is currently 5%, the firms beta (_j) is 1.16, and the expected market rate of return is currently 8%. The equation for the CAPM is: E(R_jt) = Rf(1-_j) + _jE(RM_t). What is the current estimate of the firms cost of capital?

1. 2%
2. 4.52%
3. 8.48%
4. 10.08%