Compute the weighted average cost for four plans

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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:

Plan A: Debt 8.0% weight- 10% Preferred stock 16.0% weight-5% Common equity 20.0% 85 %
Plan B: Debt 8.5% 20% Preferred stock 16.5% weight-5% Common equity 20.0% weight-75%
Plan C: Debt 9.0% 30% Preferred stock 9.8% weight-5% Common equity 16.8% weight-65%
Plan D: Debt 8.0% 40% Preferred stock 15.8% weight-5% Common equity 18.5% weight-55%

1) Compute the weighted average cost for four plans.

2) Which of the four plans has the lowest weighted average cost of capital?

Reference no: EM132904915

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