Margo Corporation is a mjaor producer of lawn care products. Its stock currently sells for $80 per share; there are 10.5 million share outstanding. Margo also has debt outstanding with a book value of $400 million. Margo bonds currrently yield 10% and trade at 90% of face valu.e The risk-free is 8%, the marketrisk premium is 9% and the Margo has beta equal to 2. The corporate tax rate is 34%

1. Margo is considering expansion of its facilities. Use SML to determine cost of equity.

2. Compute the weighted average cost of capital for Margo