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		7.0	%		20	%
Preferred stock		14.0			10
Common equity		18.0			70
Plan B
Debt		7.2	%		30	%
Preferred stock		14.2			10
Common equity		19.0			60
Plan C
Debt		8.0	%		40	%
Preferred stock		13.7			10
Common equity		15.9			50
Plan D
Debt		12.0	%		50	%
Preferred stock		14.6			10
Common equity		16.8			40

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
	Plan B
	Plan C
	Plan D

b.

What is the relationship between the various types of financing costs and the debt-to-equity ratio?

	All types of financing costs increase as the debt-to-equity ratio increases.
	All types of financing costs decrease as the debt-to-equity ratio increases.