(Divisional costs of capital and investment decisions) In May of this year, Newcastle Mig. Company's capital investment review.committee received two major investment proposals. One of the proposals was put forth by the firm's domestic manufacturing division, and the other came from the firm's distribution company. Both proposals promise a rotum on invested capital to approximately 12 percent. In the past, Newcastle has used a single firm-wide cost of capital to evaluate new investments However, managers have long recognized that the manufacturing division is significantly more risky than the distribution division. In fact, comparable firms in the manufacturing division have equity batas of about 16, whereas distribution companies typically have equity betas of only 1.1. Given the size of the two proposals Newcastle's management feels it can undertake only one, so it wants to be sure that it is taking on the more promising investment Given the importance of getting the cont of capital estimate as close to correct as possible, the firm's chief financial clicar has asked you to prepare cost of capital estimates for each of the two divisions The requisite information needed to accomplish your task follows: The cost of debt financing is 8 percent before a marginal tax rate of 21 percent. You may assume this cont of debt in after any flotation costs the firm might incut, The risk-free rate of interest on long-term U.S. Treasury bonds is currently 4.8 percent, and the market-risk premium has sveraged 7.3 percent over the past several years Both divisions adhere to target debt ratio of 40 percent 3. What is the divisional cost of capital for the manufacturing division? % (Round to two decimal places) What is the divisional cost of capital for the distribution division? 0% (Round to two decimal places.) b. Which of the two projects should the firm undertake (assuming it cannot do both due to labor and other non financial restraints (Select the best choice below)