Spartan Enterprises has a project for which they forecast the following income statement and balance sheet items using the percent of sales method.

Item	1	2
Sales	$200,000	$220,000
Costs (40% of sales)	$80,000	$88,000
Depreciation (25% of Prior Net Long Term Assets)	$50,000	$55,000
Interest (5% of Prior Debt)	$4,000	$4,400
Unlevered Net Income (Computed Directly)	$70,000	$77,000
Free Cash Flow (Computed Directly)	$44,000	$48,400
Net Capital Assets (110% of Sales)	$220,000	$242,000
Working Capital (33% of Sales)	$66,000	$72,600
Debt (40% of Assets)	$88,000	$96,800
Marginal tax rate	35%	35%

Spartan expects cost of borrowing using Equity to be 12%. If they are right, what discount rate should Spartan use for the Adjusted Present Value method of evaluating the project?

Group of answer choices

5.98%

8.40%

9.20%

12.00%