What is Automaton's cost of capital using the below information?

Cost of Equity = Risk-Free Rate + *(Equity Risk Premium)

After-Tax Cost of Debt = (1-Tax Rate) * Pre-Tax Cost of Debt

Risk-Free Rate (10-Year U.S. Treasury) = 3%

The Equity Risk Premium = 4.5%

Tax Rate: 40%

Automaton's beta () = 1.2

Automaton's Market Value of Equity / Total Capital ratio = 100%

Automaton's Market Value of Debt / Total Capital = 0%

To facilitate this temporary expansion, Automation will purchase new equipment for $1,500,000.The additional micro-processors will be manufactured in a building Automaton purchased eight years ago for $4,200,000.The building will be retooled for the new project at a cost of $500,000, which includes building permit fees of $25,000.

The purchased equipment will be depreciated using Modified Accelerated Cost Recovery System (MACRS) depreciation schedule , and sold for $250,000 in year 5.

The projected revenue for year 1 is $550,000.Subsequent year's revenues will increase by eight percent of the preceding year's revenues (i.e., year 2 revenues equals 1.08 * $550,000).This expansion project will result in an annual loss of revenues from an existing manufacturing operation of $100,000.Operating expenses (excluding depreciation and amortization) is estimated at 20 percent of net revenues.

Operating net working capital will rise by $250,000 and $300,000 in years 1 and 2, respectively.This investment in operating net working capital fully reverses in the final year of the project.Annual interest expense is fixed at $35,000