Assume the CAPM holds with a risk-free rate of 3.9% and an equity risk premium of 5.6%. A firm is worth $70 and has an asset beta of 0.4. The firm has just announced plans to invest in a new project with a cost of $16, an NPV of $2 and a beta of 1.2. The firm will issue new equity to fund the project. What is the appropriate cost of capital to be used to calculate the project NPV? Give your answer in percent to the nearest basis point.

Answer: 10.62