1. The Home Depot wants to raise new capital to compete better with Lowes. You are the finance manager for Home Depot and your CEO has asked you to calculate the weighted average cost of capital (WACC) for The Home Depot. You plan to use a mix of debt and equity as follows: 40% equity and 60% debt. The interest rate applicable to debt is 6%. The CAPM cost of equity is 3%. What would you tell your CEO is the WACC for Home Depot?
   1. 4.3%
   2. 4.8%
   3. 4.2%
   4. 3%