investments.

The cost of debt financing is $7$ percent before a marginal tax rate of $21$ percent. You may assume this cost of debt is after any flotation costs the firm might incur.

The risk$-$free rate of interest on long$-$term U$.$S$.$ Treasury bonds is currently $5\mathrm{.}9$ percent, and the market$-$risk premium has averaged $4\mathrm{.}9$ percent over the past several years.

Both divisions adhere to target debt ratios of $30$ 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 undertake $($assuming it cannot do both due to labor and other nonfinancial restraints$)?$ Discuss.