David McClemore, the CFO of Ultra Bread, has decided to use an APT model to estimate the required return on the company’s stock. The risk factors he plans to use are the risk premium on the stock market, the inflation rate, and the price of wheat. Since wheat is one of the biggest costs Ultra Bread faces, he believes this is a significant risk factor for Ultra Bread. ,,1)Explain how you would evaluate his choice of risk factors. ,,2)Identify and explain other risk factors that should be considered.,
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