Art Van is a chain of furniture retail stores. Stealcase is a furniture maker and a supplier to Art Van. Art Van has a beta of 1.38 as compared to Stealcase's beta of 1.12. Both firms carry no debt, i.e., are 100% equity-financed. The risk-free rate of return is 3.5 percent and the market risk premium is 8 percent. What discount rate should Art Van use if it considers a project that involves the manufacturing of furniture?