Eastman Chemical Companys capital portfolio consists of 25% debt and 75% equity. One-tenth of the debt capital is the result of loans having an interest rate of 5.2% per year compounded quarterly; the remainder of the debt capital is the result of $1,000, 30-year 5.0% quarterly bonds at a selling price of $996.50, after commissions. EASTMAN uses a 6% equity market risk premium in calculating its WACC; the 30-year risk-free rate is 3%; EASTMANs beta is 1.05; and its marginal corporate tax rate is 25%. An acquisition of a chemical plant in Brazil is under consideration. If acquired, EASTMAN will be the only owner and plans to make a major expansion of the site using licensed technology recently introduced to the chemical industry. EASTMAN has ambitious plans and anticipates a 12% compound annual growth rate in revenue. The economic justification will be based on a 70%/30% mix of cost savings and revenue growth. With infrastructure in place, less than 10% of the capital expenditure will be for allocated capital.

a) What is EASTMANs weighted average cost of capital? Show all calculations; give your answer in percent to 2 decimal places. Show all work.

b) Employing EASTMANs hurdle rate calculator, what will be the after-tax minimum attractive rate of return for the investment under consideration? Show all calculations; give your answer in percent to 2 decimal places. Show all work.