Q13-7 You are currently considering an investment in a project in the energy sector. The investment has the same riskiness as Exxon Mobil stock (ticker: XOM). Using the data in Table 13.1, , and the table,calculate the cost of capital using the FFC factor specification if the current risk-free rate is 2.5% per year.The cost of capital using the FFC factor specification is %. (Round to two decimal places.)Data tableFFC Portfolio Average Monthly Returns, 1927-2018Factor PortfolioMKT-rfSMBHMLPR1YRAverage Monthly Return (%) 95% Confidence Band (90.68± 0.320.220.370.68±0.19+0.21+0.28-C----XData table(Click on the following icon in order to copy its contents into a spreadsheet.)Estimated Factor Betas, 2007-2017MSFT1.10- 0.71-0.010.02FactorMKTSMBHMLPR1YRXOM0.67- 0.340.220.21GE1.22- 0.290.78- 0.17-X

The cost of capital is the estimated return that investors need to see before lending money to a…

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Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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calculate the cost of capital using the FFC factor specification if the current risk-free rate is 2.5% per year. The cost of capital using the FFC factor specification is %. (Round to two decimal places.)