A diversified conglomerate with a WACC of 8.5% evaluates entering the semiconductor business. A pure-play semiconductor company has an equity beta of 1.60, debt-to-equity ratio of 0.40, and tax rate of 25%. The conglomerate plans to finance the project at a D/E of 0.25 with a 25% tax rate. If the risk-free rate is 3.5% and the market risk premium is 6%, the project-specific cost of equity is closest to: