1. The Floral Shoppe and Maggie's Flowers are all-equity firms. The Floral Shoppe has 2,000 shares outstanding at a market price of $18 a share. Maggie's Flowers has 2,650 shares outstanding at a price of $28 a share. Maggie's Flowers is acquiring The Floral Shoppe for $34,000 in cash. The incremental value of the acquisition is $2,800. What is the net present value of acquiring The Floral Shoppe to Maggie's Flowers?
$4,800
$6,800
$3,800
$7,800
$5,800
2. The only difference in the cost of retained earnings (Ke) and the cost of new common stock (Kn) is the flotation cost on new common stock.
True
False