The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for
Question:
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for the company is shown here:
Stock price ........................................ $ 75
Number of shares ....................... 64,000
Total assets ............................. $9,400,000
Total liabilities ......................... $4,100,000
Net income ............................... $ 980,000
MHMM is considering an investment that has the same PE ratio as the firm. The cost of the investment is $1.5 million, and it will be financed with a new equity issue. The return on the investment will equal MHMM’s current ROE. What will happen to the book value per share, the market value per share, and the EPS? What is the NPV of this investment? Does dilution take place?
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan