Question
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 $ 74 Number of shares 30,000 Total assets $ 9,800,000 Total liabilities $ 4,700,000 Net income $ 420,000 MHMM is considering an investment that has the same PE ratio as the firm. The cost of the investment is $640,000, and it will be financed with a new equity issue. The additional net income is $52,704.
1. Does stock price dilution occur?
No, stock price dilution does not occur.
Yes, stock price dilution occurs.
2. Does book value dilution occur?
No, book value dilution does not occur.
Yes, book value dilution occurs.
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