Assume you would like to invest in a privately held company D and want to know the cost of capital of this company.

In the table below, you find equity factor sensitivities as well as debt to equity ratios for each company in the peer group:

	Market	Size	Value	D/E
Company F	1.24	-0.71	-0.18	0.3
Company G	1.18	-0.68	-0.72	0.07

The long term factor rates of return are:

	Market	Size	Value
Factor rate of return	7.20%	0.45%	1.80%

The risk-free rate of return amounts to 3%.

Calculate the weighted average cost of capital of company D using Merton option betas (for simplicity, assume N(d1) and N(d2) equal 1) and the Fama French three-factor model.