Problem 15-11 Dilution [LO3]

(3.)

The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for the company is shown here:

Stock price $ 56 Number of 20,000 shares Total assets $6,200,000 Total liabilities $3,000,000 Net income $ 410,000 MHMM is considering an investment that has the same PE ratio as the firm. The cost of the investment is $700,000, and it will be financed with a new equity issue. percent if we wanted the price after The ROE on the investment would have to be (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) the offering to be $56 per share (assume the PE ratio remains constant), and the NPV of the investment would be (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations.) occur in this case. Market value dilution occur in this case. - Accounting dilution does not does