Carla is starting an athletic clothing chain and has chosen REI as a comparable.  REI has an equity beta of 1.80. REI also has $80M in equity and $40M in debt,  which is has a yield of 4%. The expected return of the market is 7% and the risk- free rate is 2%.

What is the appropriate discount rate to use for Carla's athletic clothes startup? 
 

Carla's firm is made up of  $60M in equity and $20M in debt, which is risk-free. What is the expected return on equity for Carla's company?