Question: 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

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?

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