Texas Utensils is considering a new project outside of its current line of business. The project would cost $500,000 initially and would generate a revenue of $60,000 next year which would grow at 4% per year indefinitely. Since the project is outside the current line of business, managers at Texas Utensils are finding it difficult to agree on the appropriate risk-adjusted discount rate to use in valuing the project. What is the highest discount rate that could be used for the project before it would appear unprofitable?

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