Ammar has been tasked with estimating the appropriate cost of capital for his company's new division. He has the following information about the firm's capital structure:

• The firm has a D/E of 0.30.
• The yield to maturity on the company's debt is 6.03%.
• The CAPM suggests the firm's stock has a required return of 14.59%.
• The firm has a marginal tax rate of 21%.

Finally, the CFO thinks the new division is riskier than the other divisions and decides to make a subjective adjustment by making the division's required return 4.00% higher than that of the typical project in the firm.

What should Ammar's best estimate of the cost of capital be for the new division?

Multiple Choice

• 11.64%

• 9.68%

• 12.61%

• 12.32%

• 16.32%