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The Metallica Heavy Metal Mining (MHMM) Corporation wants todiversify its operations. Some

The Metallica Heavy Metal Mining (MHMM) Corporation wants todiversify its operations. Some

The Metallica Heavy Metal Mining (MHMM) Corporation wants todiversify its operations. Some recent financial information for thecompany is shown here:

 

 

 

 

 

  Stock price

$

73

 

  Number ofshares

 

40,000

 

  Total assets

$

7,600,000

 

  Totalliabilities

$

2,200,000

 

  Net income

$

440,000

 

 

       

 

MHMM is considering an investment that has the same PE ratio asthe firm. The cost of the investment is $800,000, and it will befinanced with a new equity issue. The return on the investment willequal MHMM’s current ROE.

 

What is the current book value per share? The new book value pershare? (Do not round intermediate calculations and roundyour answers to 2 decimal places, e.g., 32.16.)

 

 

 

  Current bookvalue

$  per share

  New book value

$  per share

 

   

 

What is the current market-to-book ratio? The new market-to-bookratio? (Do not round intermediate calculations and roundyour answers to 4 decimal places, e.g., 32.1616.)

 

 

 

  Currentmarket-to-book

 

  Newmarket-to-book

 

 

   

 

What is the current EPS? The new EPS? (Do not roundintermediate calculations and round your answers to 2 decimalplaces, e.g., 32.16.)

 

 

 

  Current earnings pershare

$  

  New earnings pershare

$  

 

   

 

What is the NPV of this investment? (Negative amountshould be indicated by a minus sign. Do not round intermediatecalculations and round your answer to the nearest whole dollaramount, e.g., 32.)

 

  NPV

$  

 

Does accounting dilution occur here?

 

 

Yes

 

No

 

Does market value dilution occurhere?

 

 

Yes

 

No

 

Abhinav 01-Dec-2019

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