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