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		5.0	%		20	%
Preferred stock		10.0			10
Common equity		14.0			70
Plan B
Debt		5.8	%		30	%
Preferred stock		10.8			10
Common equity		15.0			60
Plan C
Debt		6.0	%		40	%
Preferred stock		11.7			10
Common equity		17.8			50
Plan D
Debt		10.0	%		50	%
Preferred stock		12.4			10
Common equity		19.5			40

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 C
	Plan B
	Plan A
	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.