20. Mary Ott Hotels wants to determine the minimum cost of capital point for the firm. Assume it is considering the following financial plans:

a. Which of the four plans has the lowest weighted average cost of capital?
(Round to two places to the right of decimal point.)

b. Briefly discuss the results from Plan C and Plan D, and why one is better than the other.

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Cost (aftertax) Weights Plan A Debt ..... 6.0% 20% Preferred stock 10.0 10 Common equity 13.0 70 Plan B Debt 6.5% 30% Preferred stock 10.5 10 Common equity 13.5 60 Plan C Debt ... 7.0% 40% Preferred stock 10.7 10 Common equity 14.2 50 Plan D Debt .... 9.0% 50% Preferred stock 11.2 10 Common equity 16.0 40