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		4.0	%		10	%
Preferred stock		8.0			5
Common equity		12.0			85
Plan B
Debt		4.2	%		20	%
Preferred stock		8.2			5
Common equity		13.0			75
Plan C
Debt		5.0	%		30	%
Preferred stock		10.7			5
Common equity		9.6			65
Plan D
Debt		13.0	%		40	%
Preferred stock		11.6			5
Common equity		11.6			55

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.