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 Jen’s athletic
clothes startup?
The discount rate is 8.69%
Please answer this question below in bold and don't use excel. Show work. Thank you.
(Using the information from the previous question) Jen’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 Jen’s company?
