XYZ Inc. has a stock price of $15 per share with 0.6 million shares outstanding. The company also has 10,000 bonds outstanding. The book value of bonds is $12 million. The bonds have a low credit rating (high default risk). The current price of the bonds is $1, 100. The company has equity beta of 2.5 and a debt beta of 0.5.

Assume that the risk-free interest rate is 2% and expected market risk return is 6%. Amarillo Tech.Inc. faces a marginal tax rate of 35%. Suppose it management is considering a project that has the same risk and same financing mix as the firm. What is the cost of capital to discount the FCF of the project ?