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3. Constructing a Factor: You are trying to build a factor model with two factors: The CAPM market factor, and a natural gas price factor.

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3. Constructing a Factor: You are trying to build a factor model with two factors: The CAPM market factor, and a natural gas price factor. You have the following information available to you: a. 5 points. Estimate value of the CAPM factor. b. 10 points. Estimate the value of the natural gas price factor. c. 10 points. If a firm has a beta of 1.1 with respect to the CAPM factor, and 0.4 with respect to the natural gas factor, what is their cost of equity

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