T Enterprises is considering undertaking a new project. Based upon analysis of firms with similar projects, KT has determined that an unlevered cost of equity of 12% is suitable for their project. KT's marginal tax rate is 35%, its borrowing rate is 7%, and KT does not believe that its borrowing rate will change if the new project is accepted. If KT expects to maintain a debt-to-equity ratio of 1 for this project, then KT's equity cost of capital, rE, for this project is closest to ___.

12%

17%

5%

15%