Jerry Springer is the Chief Financial Officer of the Tesla Car Company, an electric vehicle company with a debt to equity ratio of 0.60. Jerry needs to sell some equity to help pay for the construction of a factory. He also plans to borrow some cash so that the debt to equity ratio does not change after the fundraising exercise. Jerry wants to figure out the cost of equity capital for his company.

Normally, Jerry would estimate the cost of capital by using the Capital Asset Pricing Model. But he needs the company's beta to use this approach. Since the company is private, Jerry cannot do a regression analysis of Tesla Car Company stock returns versus the return on the S&P500. All he knows is that the risk-free rate is 2.5%, and he estimates the expected return on the market is 10.5%. His investment banker, Bill Bigfee, says that Nicola is a company that resembles the Tesla Car Company, and it has a beta of 2.0. The only difference is that Nicola has no debt.

What is the Lightning Car Company's cost of equity capital?