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The Hagerman Heavy Metal Mining ( H 2 M 2 ) Corporation wants to diversify its operations. Some recent financial information for the company is
The Hagerman Heavy Metal Mining HM Corporation wants to diversify its operations. Some recent financial information for the company is shown here:
Stock price $
Number of shares
Total assets $
Total liabilities $
Net income $
HM is considering an investment that has the same PE ratio as the firm. The cost of the investment is $ and it will be financed with a new equity issue. The return on the investment will equal HMs current ROE.
What will happen to the book value per share? Do not round intermediate calculations. Round the final answers to decimal places. Omit $ sign in your response.
Current book value $
per share
New book value $
per share
What will happen to the markettobook ratio? Do not round intermediate calculations. Round the final answers to decimal places.
Current markettobook
New markettobook
What will happen to the EPS? Do not round intermediate calculations. Round the final answers to decimal places. Omit $ sign in your response.
Current earnings per share $
New earnings per share $
What is the NPV of this investment? Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round the final answer to the nearest whole dollar. Omit $ sign in your response.
NPV $
Does accounting dilution occur here?
multiple choice
Yes
No
Does market value dilution occur here?
multiple choice
Yes
No
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