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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)Weights Plan A Debt 4.0 % 30 % Preferred stock 8.015 Common equity 12.055 Plan B Debt 4.5 % 40 % Preferred stock 8.515 Common equity 13.045 Plan C Debt5.0 % 45 % Preferred stock 18.715 Common equity 12.840 Plan D Debt12.0 % 50 % Preferred stock 19.215 Common equity 14.535 Page 367 a. Which of the four plans has the lowest weighted average cost of capital? (Round to two places to the right of the decimal point.) b. Briefly discuss the results from Plan C and Plan D, and why one is better than the other.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92346409

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