You are currently considering making an investment in the fast food industry. You determine the project has
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You are currently considering making an investment in the fast food industry. You determine the project has the same level of non-diversifiable risk as investing in McDonald’s stock. You use data over the past nine years to estimate the factor betas of McDonald’s stock (ticker symbol: MCD). Specifically, you regress the monthly excess return (the realized return in each month minus the risk-free rate) of McDonald’s stock on the return of each of the four-factor portfolios. You determine that the factor betas for MCD are:
The current risk-free monthly rate is 2.4%/12 = 0.2%. Determine the cost of capital by using the FFC factor specification.
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Related Book For 
Fundamentals Of Corporate Finance
ISBN: 9780137852581
6th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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