Question
In: Finance
10. The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial...
10. The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for the company is shown here:
Stock Price $75
Number of shares 64,000
Total assets $9,400,000
Total liabilities $4,100,000
Net income $980,000
MHMM is considering an investment that has the same PE ration as the firm. The cost of the investment is $1.5 million, 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, and the EPS? What is the NPV of this investment? Does dilution take place?
11. In problem 10, what would the ROE on the investment have to be if we wanted the price after the offering to be $75 per share?(Assume the PE ration remains constant.) What is the NPV investment? Does any dilution take place?
Solutions
jeff jeffy answered 4 months agoRelated Solutions
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information...
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 40,000
Total assets $ 8,200,000
Total liabilities $ 4,000,000
Net income $ 700,000
MHMM is considering an investment that has the same PE ratio as
the firm. The cost of the investment is $800,000, and it will be
financed with a new equity issue. The return on the investment will
equal...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to
diversify its operations. Some recent financial information for the
company is shown here:
Stock price
$
50
Number of shares
40,000
Total assets
$
6,000,000
Total liabilities
$
2,000,000
Net income
$
500,000
The company is considering an investment that has the same PE ratio
as the firm. The cost of the investment is $800,000, and it will be
financed with a new equity issue. (Do not round
intermediate calculations.)...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to
diversify its operations. Some recent financial information for the
company is shown here:
Stock price
$
69
Number of shares
30,000
Total assets
$
8,700,000
Total liabilities
$
3,600,000
Net income
$
600,000
The company 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 return on the investment will...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information...
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 40,000
Total assets $ 8,200,000
Total liabilities $ 4,000,000
Net income $ 700,000
MHMM is considering an investment that has the same PE ratio as
the firm. The cost of the investment is $800,000, and it will be
financed with a new equity issue. The return on the investment will
equal...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information...
The Metallica Heavy
Metal Mining (MHMM) Corporation wants to diversify its operations.
Some recent financial information for the company is shown
here:
Stock price
$
40
Number of
shares
30,000
Total
assets
$
9,800,000
Total
liabilities
$
4,700,000
Net income
$
420,000
The company 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. (Do not round
intermediate calculations.)...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information...
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 $ 7,000,000
Total liabilities $ 5,000,000
Net income $ 880,000
MHMM is considering an investment that has the same PE ratio as
the firm. The cost of the investment is $750,000, and it will be
financed with a new equity issue. The return on the investment will
equal...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to
diversify its operations. Some recent financial information for the
company is shown here:
Stock price $ 30
Number of shares 30,000
Total assets $ 8,600,000
Total liabilities $ 4,400,000
Net income $ 780,000
MHMM is considering an investment that has the same PE ratio as
the firm. The cost of the investment is $750,000, and it will be
financed with a new equity issue.
The ROE on the investment would have...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to
diversify its operations. Some recent financial information for the
company is shown here:
Stock price
$
79
Number of
shares
20,000
Total
assets
$
8,400,000
Total
liabilities
$
2,800,000
Net income
$
420,000
The company 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...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to
diversify its operations. Some recent financial information for the
company is shown here:
Stock price
$
67
Number of
shares
35,000
Total assets
$
8,100,000
Total
liabilities
$
4,900,000
Net income
$
750,000
MHMM is considering an investment that has the same PE ratio as
the firm. The cost of the investment is $850,000, and it will be
financed with a new equity issue. The return on the investment will
equal...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to
diversify its operations. Some recent financial information for the
company is shown here:
Stock price
$
75
Number of shares
40,000
Total assets
$
6,000,000
Total liabilities
$
2,000,000
Net income
$
500,000
The company is considering an investment that has the same PE ratio
as the firm. The cost of the investment is $800,000, and it will be
financed with a new equity issue. The return on the investment will...
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