R. S. Green is a chain of furniture retail stores. Morris Industries is a furniture maker and a supplier to R. S. Green.

R. S. Green has a beta of 1.35 as compared to Morris Industries' beta of 1.15. The risk-free rate of return is 3.6 percent and the market risk premium is 8 percent. Both firms are all equity financed.

What discount rate should R. S. Green use if it considers a project that involves the manufacturing of furniture?

(round answer to whole number with two decimal points: i.e., use 1.23 percent instead of 0.0123)