Question
The Hagerman Heavy Metal Mining (H2M2) Corporation wants to diversify its operations. Some recent financial information for the company is shown here: Stock price $
The Hagerman Heavy Metal Mining (H2M2) Corporation wants to diversify its operations. Some recent financial information for the company is shown here: Stock price $ 77 Number of shares 20,000 Total assets $ 6,200,000 Total liabilities $ 3,000,000 Net income $ 410,000 H2M2 is considering an investment that has the same P/E ratio as the firm. The cost of the investment is $700,000, and it will be financed with a new equity issue. The return on the investment will equal H2M2s current ROE. What will happen to the book value per share? (Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.) Current book value $ 160 per share New book value $ 134.06 per share What will happen to the market-to-book ratio? (Do not round intermediate calculations. Round the fianl answers to 3 decimal places.) Current market-to-book 0.481 New market-to-book What will happen to the EPS? (Do not round intermediate calculations. Round the final answers to 2 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 1 Yes No Does market value dilution occur here? multiple choice 2 Yes No
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