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 1.05.
• The yield to maturity on the company's debt is 6.36%.
• The CAPM suggests the firm's stock has a required return of 16.27%.
• The firm has a marginal tax rate of 24%.
• 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 2.50% 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 11.19% 12.91% 10.55% 4.26% 10.41%