You have run two regressions of ADIDAS "AD" returns. In the first, you regressed ADIDAS monthly returns against returns on the DAX – both in DM terms: Ret "AD" = 0.04% + 1.7 (Returns dax ) R2 = 58% %3D You also regressed the returns on ADIDAS against the Morgan Stanley Capital Index "ms"that includes global equities – both returns are dollar returns: Ret "ad" = -0.02% + 0.9 (Returns "ms") R2 = 14% Assume that the seven of the top ten investors in ADIDAS are international mutual funds. (The German long term bond rate is 0.05 , the US long term bond rate is 0.062 and the equity risk premium in both markets is 6% Estimate ADIDAS cost of equity in DM terms

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