Question
Having some trouble with this. The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for the company is
Having some trouble with this.
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for the company is shown here:
Stock price $80
Number of shares40,000
Total assets $8,800,000
Total liabilities $5,100,000
Net income $900,000
The company is considering an investment that has the same PE ratio as the firm. The cost of the investment is $640,000, and it will be financed with a new equity issue.
The ROE on the investment would have to be_____ percent if we wanted the price after the offering to be $80 per share (assume the PE ratio remains constant), and the NPV of the investment would be $________
ROE INVESTMENT =
NPV OF INVESTMENT =
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