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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).

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). Calculate the cost of capital using the FFC factor specification if the current risk-free rate is 5% per year. Please give a detailed answer

Factor

XOM

MKT

0.60

0.808

SMB

0.25

-0.812

HML

0.35

0.196

PR1YR

0.70

0.376

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