Homework answers / question archive / The all-equity firm Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations

The all-equity firm Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations

Finance

Share With

The all-equity firm Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. MHMM is considering a new 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. Some recent financial information for the company is shown here:

Number of shares = 30,000

Total assets = $8,700,000

Total liabilities = $3,600,000

Net income = $600,000

1. What is the ROE of the new investment if we want the price after the offering to be $50 per share?
2. What is the NPV of the new investment?