You have run two regressions of ADIDAS "AD" returns. In the first, you regressed ADIDAS monthly returns against returns on the DAX both in DM terms: Ret "AD" = 0.04% + 1.7 (Returns dax )

R2 = 58%

You also regressed the returns on ADIDAS against the Morgan Stanley Capital Index "ms"that includes global equities both returns are dollar returns:

Ret "ad" = -0.02% + 0.7 (Returns "ms" )

R2 = 14%

Assume that the seven of the top ten investors in ADIDAS are international mutual funds. (The German long term bond rate is 0.05 , the US long term bond rate is 0.065 and the equity risk premium in both markets is 6%

Estimate ADIDAS cost of equity in DM terms