The all-equity firm Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial
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The all-equity firm Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for the company is shown here: |
Stock price | $ 71 |
---|---|
Number of shares | 35000 |
Total assets | $ 8,6500,000 |
Total liabilities | $ 48500,000 |
Net income | $ 880,000 |
MHMM is considering an investment that has the same PE ratio as the firm. The cost of the investment is $750,000, and it will be financed with a new equity issue. The return on the investment will equal MHMM's current ROE. |
a. | What is the new price per share if the investment is made? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
b. | What will happen to the book value per share? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
c. | What will happen to the market-to-book ratio? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) |
d. | What will happen to the EPS? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
e. | What is the NPV of this investment? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) |
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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