Jonas Corp.’s capital structure is 60% debt and 40% equity. The company is evaluating a project involving a new OLED screen material called Duraglass. Keiko Ltd. is currently the only producer of Duraglass. Keiko’s beta is 0.9 and Keiko’s capital structure is 25% debt and 75% equity. The risk free-rate is 3%, the market premium is 7%, and Jonas’s after-tax cost of debt is 5%. What discount hurdle rate should Jonas apply to the new project? Use the proxy firm beta method.
Discount hurdle rate = ______________%