Consider a project with free cash flows in one year of $90,000 in a weak economy or $117,000 in a strong economy, with each outcome being equally likely. The initial investment required for the project is $90,000, and the project's cost of capital is 15%. The risk-free interest rate is 5%.

Question: If two separate firms are considering investing in this project, the firm using unlevered equity plans to fund the entire investment using equity, while firm using levered plans to borrow $45,000 at the risk-free rate and use equity to finance the remainder of the initial investment. According to MM proposition II, the firm's equity cost of capital will be closest to?