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 1 and Table 2 calculate the cost of capital using the FFC factor specification if the current risk-free rate is 2.7% per year.

The cost of capital using the FFC factor specification is ___%?

Table 1: Estimated Factor Betas, 2005-2015 Factor MSFT XOM GE MKT 0.32 0.73 1.29 SMB -0.45 -0.57 -0.39 HML -0.12 0.17 0.82 PR1YR -0.06 0.33 -0.22

Table 2: FFC Portfolio Average Monthly Returns, 1927-2015 Factor Portfolio Average Monthly Return (%) 95% Confidence Band (%) MKT - rf .64 (+0.33, -0.33) SMB 0.23 (+0.19, -0.19) HML 0.34 (+0.21, -0.21) PR1YR 0.65 (+0.29, -0.29)