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 % 15 %

Preferred stock 8.0 10

Common equity 16.0 75

Plan B

Debt 4.8 % 25 %

\Preferred stock 8.6 10

Common equity 13.0 65

Plan C

Debt 5.0 % 35 %

Preferred stock 17.7 10

Common equity 10.5 55

Plan D Debt 15.0 % 45 %

Preferred stock 18.4 10

Common equity 12.6 45

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.)

b. What is the relationship between the various types of financing costs and the debt-to-equity ratio?