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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 | 8.0 | % | 25 | % | ||
Preferred stock | 16.0 | 15 | ||||
Common equity | 20.0 | 60 | ||||
Plan B | ||||||
Debt | 8.8 | % | 35 | % | ||
Preferred stock | 16.8 | 15 | ||||
Common equity | 20.0 | 50 | ||||
Plan C | ||||||
Debt | 9.0 | % | 45 | % | ||
Preferred stock | 15.7 | 15 | ||||
Common equity | 10.5 | 40 | ||||
Plan D | ||||||
Debt | 13.0 | % | 55 | % | ||
Preferred stock | 16.4 | 15 | ||||
Common equity | 12.8 | 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.)
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