Assume that Expansion Ltd is a diversified company that is considering an expansion project in a mining division. The company has a target debt-equity ratio of 1:2 and this ratio will not be affected by the new project. The company's manager has identified Dig-it-out Ltd as a company with the same business risk as the new project (equity beta of 1.5). Dig-it-out has a debt-equity ratio of 1:3. Estimate the project's cost of equity for Expansion if the risk-free rate of interest is 7 per cent and the risk premium of the market portfolio is 10 per cent.