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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
Plan A





Debt
6.0 %
25 %
Preferred stock
12.0

15
Common equity
16.0

60
Plan B





Debt
6.6 %
35 %
Preferred stock
12.6

15
Common equity
17.0

50
Plan C





Debt
7.0 %
45 %
Preferred stock
19.7

15
Common equity
15.5

40
Plan D





Debt
17.0 %
55 %
Preferred stock
20.4

15
Common equity
17.6

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.)
  




a-2. Which of the four plans has the lowest weighted average cost of capital?
  


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