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 6.0 % 25 % Preferred stock 12.0 15 Common equity 16.0 60 Plan B Debt 6.2 % 35 % Preferred stock 12.2 15 Common equity 17.0 50 Plan C Debt 7.0 % 45 % Preferred stock 11.7 15 Common equity 7.6 40 Plan D Debt 7.0 % 55 % Preferred stock 12.6 15 Common equity 9.8 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.) Weighted Cost Plan A % Plan B % Plan C % Plan D % a-2. Which of the four plans has the lowest weighted average cost of capital? Plan A Plan B Plan C Plan D b. What is the relationship between the various types of financing costs and the debt-to-equity ratio? All types of financing costs increase as the debt-to-equity ratio increases. All types of financing costs decrease as the debt-to-equity ratio increases. HintsReferenceseBook & Resources WorksheetDifficulty: IntermediateLearning Objective: 11-01 The cost of capital represents the weighted average cost of the source of financing to the firm. Check my work ©2016 McGraw-Hill Education. All rights reserved.