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	$	50
Number of shares		30,000
Total assets	$	6,300,000
Total liabilities	$	3,300,000
Net income	$	390,000

   
The company 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. (Do not round intermediate calculations.)

The ROE on the investment would have to be       percent (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

if we wanted the price after the offering to be $50 per share (assume the PE ratio remains constant), and the NPV of the investment would be $        (Leave no cells blank - be certain to enter "0" wherever required.). Accounting dilution (Click to select)does/does not occur in this case. Market value dilution (Click to select)does not/does occur in this case.

Answer 1