Pierre Corp. has an asset Beta of 0.90, a debt Beta of zero, $100 million of debt, and 100 million of equity (all at market value). The corporate tax rate is 40%. The market portfolio required return is 14% and the risk- free rate is 7%.

Pierre is considering a new project that has an asset Beta of 1.2. Pierre will fund the new asset using debt and equity, and Pierre will maintain the existing debt/equity ratio of the company. The project has an internal rate of return (IRR) of 15%.

Calculate the cost of capital associated with the new project. Should Pierre Corp. accept the new project?