A real estate investment company plans to self-fund (use equity) 25% of all projects with the remaining 75% to be financed with mortgage debt expected to cost 5% (interest rate) on average. Expected rental income growth in the areas where the firm operates is 2%? If the firm's required levered (equity) return is 15%, at what cap rate should it acquire properties to meet its return objective? (Hint: First, find the required unlevered returb using the leverage equation and then compute the cap rate.)