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		8.0	%		15	%
Preferred stock		16.0			10
Common equity		20.0			75
Plan B
Debt		8.2	%		25	%
Preferred stock		10.2			10
Common equity		15.0			65
Plan C
Debt		9.0	%		35	%
Preferred stock		14.7			10
Common equity		14.5			55
Plan D
Debt		11.0	%		45	%
Preferred stock		15.6			10
Common equity		15.8			45

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.