1. Marsha Corporation is financed as follows:

--60,000 ten-year bonds with market values of 94% of face value of $1,000.

--80,000 shares of preferred stock trading in an active market at $16 per share

--1,000,000 shares of common stock trading in an active market at $23 per share

--The bonds pay $60 interest payments annually, have a face value of $1,000.

--Marsha is in the 29% marginal tax bracket

--The preferred stock pays a $2.20 dividend with no growth.

--The common stock has a beta of 1.3, the risk-free rate is 3.5%, and the market risk premium is 6%.

1. Given the information above, what is the weighted average cost of capital for Marsha Corporation?

2 .Able Corporation is considering the acquisition of Target Corporation.Target Corporation has 1,020,000 shares of stock, with earnings per share of $4.50 and a market price per share of $80.Able Corporation has 1,565,000 shares outstanding with earnings per share of $6.00 and a market price of $55.The merger is expected to increase net income of the combined companies by $2,600,000 (in synergistic benefits).What is the maximum exchange ratio Able Corporation can offer and what is the minimum exchange ratio Target Corporation can accept?

3 Sally Corp. is expected to pay a dividend of $2.58 per share over the next year, and the stock is currently selling for $37.50 a share. If dividends are expected to grow at 1 percent a year, what is the cost of existing common stock?