XM Radio s equity has a book value of $25 million and a market value of $75 million. Its market value of debt is equal to its book value of debt, $50 million. The companys cost of debt is 10%. The risk-free rate is 5%. The expected market risk premium is 10%. The companys equity has a beta of 1.5.

(a) Whats the expected return on the companys equity?

(b) Whats the companys weighted average cost of capital?