Jen 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 Jens athletic

clothes startup?

Jens firm is made up of

$60M in equity and $20M in debt, which is risk-free. What is the expected return

on equity for Jens company?