Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for the company is shown here: Stock price $
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for the company is shown here: |
Stock price | $ | 78 | |
Number of shares | 20,000 | ||
Total assets | $ | 8,400,000 | |
Total liabilities | $ | 3,900,000 | |
Net income | $ | 870,000 | |
MHMM is considering an investment that has the same PE ratio as the firm. The cost of the investment is $600,000, and it will be financed with a new equity issue. The return on the investment will equal MHMMs current ROE. |
a. | What is the current book value per share? The new book value per share? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
b. | What is the current EPS? The new EPS? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
c. | What is the current market-to-book ratio? The new market-to-book ratio? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) |
d. | 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 dollar amount, e.g., 32.) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started