"You work for Microsoft Corporation ( ticker : MSFT ) , and you are considering whether to develop a new software product . The risk of the investment is the same as the* risk of the company .* a . Using the data in Table I shown here , ] , and Table 2 shown here , ] . calculate the cost of capital using the FFC factor specification if the current risk - free rate is 2. 7%/6 per year . 6 . Microsoft's CAPMY beta over the same period was O. BG . What cost of capital would you estimate using CAPMI?) a . Using the data in Table I 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| 3. 26| % . ( Round to two decimal places . !" b . Microsoft's CAFM beta over the same period was O. $6 . What cost of capital would you estimate using CAPM? The cost of capital using the CAPM is| 3.27| %/6. ( Round to two decimal places . ! ~ Data Table Data Table* - X ( Click on the icon located on the top - right com ( Click on the icon located on the top - right corner of the data table below in order to copy it's! contents into a spreadsheet. ! contents into a spreadsheet . !` Table 1 : Estimated Far Table 2: FFC Portfolio Average Monthly Returns , 1927 - 2015 Factor MSFT Factor Portfolio Average Monthly Return ( %/0 ) 95% Confidence Band ( 9/6 ) MIK'T 1. 1 1 MIKT - FF 0. 6.5 + 0. 3.3 SME - 0. 47 SMB 0. 18 + 0. 19 Enter YOU HAVIL - 0. 13 HILL 0. 35 + 0. 21 PRYYR - 0.05 PRTYR 0. 72 + 0. 29