(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 film's domestic manufacturing alon, and th other came from the firm's distribution company. Both proposals promise a retum on invested capital to approximately 16 percent to the pool Newcastle has itseda single fawidhe cost of coal to evaluate new investrants 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 holds of about 17 wherus chibution companies typically have ogurly betas of only 12. 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 promiloing inwestrera Given the importance of sporting the cost of capital esmal we chose to correct as possible the firm's chief financial officer was asked you to prepare cost of capital estimates for each of the two dicho requisite information needed to accomplish your task for The cost of debt financing is 9 percent before a marginal tax rate of 24 percent. You may assume this cost of debt is after any lutation costs the time in The sek-le tale of interest on long-term US Treasury bonds is currently 7-8 percent, and in markat-risk premium has averaged 4 6 percent over the past several years Both divisions adhere to target debt ratios of 60 percent The firm has sufficient internally generated funds such that no new stock will have to be sold to raise equity financing a. Estimate the divisional costs of capital for the manufacturing and distribution divisions. b. Which of the two projects should the firm undiatake (assuming il carnal do both due to labor and other nonfinancial restraints? Discuss a. What is the divisional cost of capital for the manufacturing division? Round to two decimal places.)