A firm has a capital structure of 100% equity. An analyst wants to estimate the current cost of capital for the firm. He has collected some financial data shown in the table below:

FINANCIAL INSTRUMENT

90-day Treasury Bill 1.14%

Return or YIELD TO MATURITY

S&P 500 Market Index 7.83%

The beta for the firm is 1.31.

The firm is considering a capital budgeting project that will create a cash flow next year of $509,675.00. The project cash flows will grow by 4.00% each year for a 9.00-year period, and the cost of the project is $3,432,897.00 today.

What is an estimate for the current cost of capital?