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 above, calculate the cost of capital using the FFC factor specification if the current risk-free rate is 3% per year
Factor---------XOM
MKT----------.78
HML------------.62
SMB-----------.21
PR1YR-----------.32
Factor Portfolio------------------------average monthly return (%)
MKT - rf------------------------------------------.65
SMB--------------------------------------------.23
HML----------------------------------------------------.39
PR1YR-----------------------------------------------.68