The AAA Corporation is all-equity financed. It has a market value of assets of $1 billion. The risk free rate is 5% per year. The beta of the company's common stock with respect to the market (MKT) portfolio is 2.0, the beta with respect to the SMB factor is -1.0, and the beta with respect to the HML factor is 1.0. The market (MKT) risk premium is 6%, the risk premium on SMB is 3%, and the risk premium on HML is 5%. 

What is the company's cost of equity capital based on the Fama-French three factor model?

Answer rating: 100% (QA)

SOLUTION Risk free rate 5 Market premium 6 SMB premium ... View the full answer