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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 20% 7.0% 14.0 18.0 10 70 30% 7.5% 14.5 19.0 10 60 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 40% 8.0% 14.7 10.8 10 50 50% 10.0% 15.2 12.5 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? O Plan A O Plan B O Plan C O Plan D
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