Ignoring tax deductions, a stock with 50% equity financing, 50% debt financing, a beta of 1.10 and debt at 7% interest has a WACC of:

1. 9.25% if the risk free rate is 5% and the equity risk premium is 5%

2. 8.75% if the risk free rate is 5% and the equity risk premium is 5%

3. 8.75% if the risk free rate is 6% and the equity risk premium is 5%

4. 8.00% if the risk free rate is 5% and the equity risk premium is 5%

5. None of the above