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Sauer Milk Inc wants to determine the minimum cost of capital point for the firm Assume it is considening the following financial plans Cost (aftertax)
Sauer Milk Inc wants to determine the minimum cost of capital point for the firm Assume it is considening the following financial plans Cost (aftertax) Weights Plan A Debt Preferred stock Common equity Plan B Deb Preferred stock Common equity Plan C Debt Preferred stock Common equity 80% 16.0 200 28% 60 88% 168 20.0 35% 15 50 15.7 10.5 15 40 Plan D Debt Preferred stock Common equity 130% 16.4 12.8 55% 15 30 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 Pian 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 b. What is the relationship between the various types of financing costs and the debt-to-equity rato O All types of financing costs increase as the debt-to-equity ratio increases O All types of financing costs decrease as the debt-to-equity ratio increases
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