Margo Corporation is a major producer of lawn care products.Its stock is currently trading at $8 per share; there are 10.5 million shares outstanding.Margo also has debt outstanding with a book value of $400million.The required rate of return on the bond is 10% and the bonds are currently priced in the market at 90% of their book value.Assume the risk-free rate is 8%, the market risk premium is 9%, Margo's beta is 2, and its tax rate is 35%.

a) Calculate the cost of equity using the SML.

b) Calculate the weighted average cost of capital.