An unlevered company with a cost of equity of 15% generates $7 million in earnings before interest and taxes (EBIT) each year. The decides to alter its capital structure to include debt by adding $3 million in debt with a pre-tax cost of 6% to its capital structure and using the proceeds to reduce equity by a like amount as to keep total invested capital unchanged. The firm pays a tax rate of 28%.

Assuming that the company's EBIT stream can be earned into perpetuity and that the debt can be perpetually issued (or rolled), what will be the firm's new cost of equity?