Question

Sauer Milk Inc. wants to determine the minimum cost of capital point for the firm. Assume...

Sauer Milk Inc. wants to determine the minimum cost of capital point for the firm. Assume it is considering the following financial plans: Cost (after tax) 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.)

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