Final answer:
The weighted average cost of capital (WACC) is the average rate of return a company must earn on its existing assets to maintain the current value of its stock. Option 1) about 4.88% is the closest answer to a WACC of around 4%.
Step-by-step explanation:
The weighted average cost of capital (WACC) is the average rate of return a company must earn on its existing assets to maintain the current value of its stock. It is calculated by weighing the cost of equity and the cost of debt based on their respective proportions in the company's capital structure.
In this case, we don't have information about the proportions of equity and debt in Fake Company Sigma's capital structure, so we can't calculate the exact WACC. However, given the options provided, the closest answer to a WACC of around 4% would be option 1) about 4.88%. It is important to note that without the exact proportions of equity and debt, we cannot determine the precise WACC.