The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for
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 ................................ $73
Number of shares .............. 45,000
Total assets ...................$6,500,000
Total liabilities ..............$1,600,000
Net income ..................... $630,000
MHMM is considering an investment that has the same PE ratio as the firm. The cost of the investment is $1,100,000, and it will be financed with a new equity issue. The return on the investment will equal MHMM’s current ROE. What will happen to the book value per share, the market value per share, and the EPS? What is the NPV of this investment? Does dilution take place?
CorporationA Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Input Area Stock price 73 Number of shares 45000 T...View the full answer
Corporate Finance Core Principles and Applications
ISBN: 978-0077905200
3rd edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
