Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Metallica Heavy Metal Mining Corporation wants to diversify its operations. Some recent financials information on the company is listed below: Stock Price $ 7 3

Metallica Heavy Metal Mining Corporation wants to diversify its operations. Some recent financials information on the company is listed below:
Stock Price $73
# of Shares 40,000
Total Assets $7,600,000
Total Liabilities $2,200,000
Net Income $440,000
The company is considering an investment that has the same PE Ratio as the firm. The cost of investment is $800,000 and it will be financed with a new equity issue. The return on investment will equal the companys current ROE.
Current Book Value Per Share $135.00
New Book Value Per Share $121.30
Current market To Books .5407
New Market to Books .5409
Current EPS $11.00
New EPS $9.89
What is the NPV of the investment? If negative please note with minus sign and be rounded to nearest who dollar.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Company Valuation Playbook Invest With Confidence

Authors: Charles Sunnucks

1st Edition

1838470816, 978-1838470814

Students also viewed these Finance questions