Sauer Milk Inc. wants to determine the minimum cost of capital point for the firm. Assume...

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Finance

Sauer Milk Inc. wants to determine the minimum cost of capitalpoint for the firm. Assume it is considering the followingfinancial plans:
Cost
(aftertax) Weights
Plan A
Debt 5.0 % 20 %
Preferred stock 10.0 10
Common equity 14.0 70
Plan B
Debt 5.2 % 30 %
Preferred stock 10.2 10
Common equity 15.0 60
Plan C
Debt 6.0 % 40 %
Preferred stock 15.7 10
Common equity 11.6 50
Plan D
Debt 12.0 % 50 %
Preferred stock 16.6 10
Common equity 13.6 40

a-1. Compute the weighted average cost for fourplans. (Do not round intermediate calculations. Input youranswers as a percent rounded to 2 decimal places.)

a-2. Which of the four plans has the lowestweighted average cost of capital?

Plan A
Plan B
Plan C
Plan D

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Sauer Milk Inc. wants to determine the minimum cost of capitalpoint for the firm. Assume it is considering the followingfinancial plans:Cost(aftertax)WeightsPlan ADebt5.0%20%Preferred stock10.010Common equity14.070Plan BDebt5.2%30%Preferred stock10.210Common equity15.060Plan CDebt6.0%40%Preferred stock15.710Common equity11.650Plan DDebt12.0%50%Preferred stock16.610Common equity13.640a-1. Compute the weighted average cost for fourplans. (Do not round intermediate calculations. Input youranswers as a percent rounded to 2 decimal places.) a-2. Which of the four plans has the lowestweighted average cost of capital? Plan APlan BPlan CPlan D

	Cost (aftertax)			Weights
Plan A
Debt		5.0	%		20	%
Preferred stock		10.0			10
Common equity		14.0			70
Plan B
Debt		5.2	%		30	%
Preferred stock		10.2			10
Common equity		15.0			60
Plan C
Debt		6.0	%		40	%
Preferred stock		15.7			10
Common equity		11.6			50
Plan D
Debt		12.0	%		50	%
Preferred stock		16.6			10
Common equity		13.6			40