(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 return on invested capital to approximately 13 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 tho manufacturing division have equity betas of about 16 whereas distribution companies typically have equity botas of only 11 Given the size of the two proposals Newcastle's management foes 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 cost of capital estimate as close to correct as possible, the firm's chief financial officer 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 7 percent before a marginal tax rate of 27 percent. You may assume this cost of debt is after any flotation costs the tim might incur The risk free tato of interest on long tom US Treasury bonds is currently 5 percent and the market risk premium has aweraged 46 percent over the past several years . Both divisions adhere to get debt ratios of 60 percent a. What is the divisional cost of capital for the manufacturing division? % (Round to two decimal places) 1) on