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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)
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 10% 8.0% 16.0 20.0 5 85 8.5% 16.5 20.0 20% 5 75 Plan A Debt Preferred stock Common equity Plan B Debt Preferred stock Common equity Plan C Debt Preferred stock Common equity Plan D Debt Preferred stock Common equity 9.0% 9.8 16.8 30% 5 65 8.0% 15.8 18.5 40% 5 55 a-1. Compute the weighted average cost for four plans. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost % % Plan A Plan B Plan C Plan D % % a-2. Which of the four plans has the lowest weighted average cost of capital? Plan A O Plan B O Plan C O Plan D
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