Question 1. Weighted average cost of capital (LO11-1) Sauer Milk Inc. wants to determine the minimum cost of capital point for the firm. Assume it is considering the following financial plans:

	Cost (aftertax)	Weights
Plan A
Debt........................................	4.0%	30%
Preferred stock........................................	8.0	15
Common equity........................................	12.0	55
Plan B
Debt........................................	4.5%	40%
Preferred stock........................................	8.5	15
Common equity........................................	13.0	45
Plan C
Debt........................................	5.0%	45%
Preferred stock........................................	18.7	15
Common equity........................................	12.8	40
Plan D
Debt........................................	12.0%	50%
Preferred stock........................................	19.2	15
Common equity........................................	14.5	35

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

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