Company ABC is a large publicly traded firm, a market leader in producing self-driving agricultural machines. The company is looking at setting up a manufacturing plant overseas to produce a new line of self-driving tractors. This will be a four-year project. The plant and equipment will cost $100 million to build. The market data on ABCs securities is following:

Debt: 519259 5.6 percent coupon bonds outstanding, 20 years to maturity, selling for $1080 each; the bonds have a $1,000 par value each and make semiannual payments. The YTM of the bonds is 4.96 percent.

Common stock: 21771779 shares outstanding, selling for $56 per share; the beta is 1.

Preferred stock: 1322958 shares of preferred stock outstanding, promising $3 per share dividend, selling for $85 per share.

Market: 7 percent expected market risk premium; 3 percent risk-free rate.

ABC faces 8 percent floatation costs of new common stock issues, 6 percent on new preferred stock issues, and 4 percent on new debt issues. ABCs tax rate is 30 percent.

Calculate the cost of preferred stock.

Express your answer as percent.