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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 5.0% 10.0 14.0 35% 15 50 5.5% 10.5 15.0 45% 15 40 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 6.0% 19.7 13.8 50% 15 35 13.0% 20.2 15.5 60% 15 25 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 9 Plan D % 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 C O Plan A O Plan B O Plan D
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