Garry's Sweets has a capital structure of 40% debt and 60% equity, its tax rate is 35% and its unlevered beta bU=0.90. The risk free rate is 3.0% and the market risk premium is 6.0%. The firm has issued no preferred stock. What would be Gary's Sweets WACC? Assume the cost of debt rd is 6.0% (fist calculate the levered beta using hamada equation, then compute rs using CAPM. Then use WACC formula to calculate.

4.22%

5.46%

8.62%

6.81%

8.00%