Heavenly Spices, Inc. has perpetual EBIT of $10 million per year. The all-equity discount rate R0 for Heavenly Spices is 16 percent. The companys tax rate is 21 percent. The cost of debt capital is 10 percent, and the company has $20 million of debt in its capital structure. (Assume debt and equity are the only financing choices of the firm).

If Heavenly Spices has exactly 37.5% debt and 62.5% equity in its capital structure, then the cost of equity of Heavenly Spices is closest to: