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.)
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.)
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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Question
Q13-7
Transcribed Image Text: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 table
FFC Portfolio Average Monthly Returns, 1927-2018
Factor Portfolio
MKT-rf
SMB
HML
PR1YR
Average Monthly Return (%) 95% Confidence Band (9
0.68
± 0.32
0.22
0.37
0.68
±0.19
+0.21
+0.28
-
C----
X
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Estimated Factor Betas, 2007-2017
MSFT
1.10
- 0.71
-0.01
0.02
Factor
MKT
SMB
HML
PR1YR
XOM
0.67
- 0.34
0.22
0.21
GE
1.22
- 0.29
0.78
- 0.17
-
X
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