Remax has the following capital structure based on market value.

• Long-term debt $1000 million
• Preferred stock 5 million shares at $4 per share
• Common stock 30 million shares at $9 per share

Costs of debt and equity are as follow:

• Before-tax cost of debt 2%
• Cost of preferred stock 10%
• Cost of equity 7%
• Tax rate 30%

What is the cost of capital for Remax?

Cost of capital = __________%