Discount Limited is considering an investment to diversify into a different industry. It has established the following information: a) The Asset Beta for companies in the industry is 0.95. b) The mean of the Equity Betas of quoted companies in the industry is 1.25. c) Equity market risk premium =5%. d) Discount Limited has a gearing ratio of 12%, measured as the market value of debt to the market value of debt plus the market value of equity. e) The risk-free rate of interest is 2.5% per year on three-year government bonds and 3.8% per year on ten-year government bonds. f) The rate of taxation is 25%. g) The company intends to apply a discount rate to the estimated cash flows of the project that is equal to the cost of equity plus a premium of 3%. Required What cost of capital should be applied to this proposed investment