Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
Bartleby Related Questions Icon

Related questions

Question

14) Can i please get help with this practice question.

The Hagerman Heavy Metal Mining (H2M2) Corporation wants to diversify its operations. Some recent financial information for the
company is shown here:
Stock price
$
35,000
$8,100,000
$4,900,000
$
67
Number of shares
Total assets
Total liabilities
Net income
750,000
H2M2 is considering an investment that has the same P/E 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 H2M2's current ROE.
What will happen to the book value per share? (Do not round intermediate calculations. Round the final answers to 2 decimal
places. Omit $ sign in your response.)
Current book value
per share
New book value
2$
per share
What will happen to the market-to-book ratio? (Do not round intermediate calculations. Round the fianl answers to 3 decimal
places.)
Current market-to-book
New market-to-book
What will happen to the EPS? (Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in
your response.)
Current earnings per share
$
New earnings per share
expand button
Transcribed Image Text:The Hagerman Heavy Metal Mining (H2M2) Corporation wants to diversify its operations. Some recent financial information for the company is shown here: Stock price $ 35,000 $8,100,000 $4,900,000 $ 67 Number of shares Total assets Total liabilities Net income 750,000 H2M2 is considering an investment that has the same P/E 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 H2M2's current ROE. What will happen to the book value per share? (Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.) Current book value per share New book value 2$ per share What will happen to the market-to-book ratio? (Do not round intermediate calculations. Round the fianl answers to 3 decimal places.) Current market-to-book New market-to-book What will happen to the EPS? (Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.) Current earnings per share $ New earnings per share
What is the NPV of this investment? (Negative answer should be indicated by a minus sign. Do not round intermediate calculations.
Round the final answer to the nearest whole dollar. Omit $ sign in your response.)
NPV
Does accounting dilution occur here?
Yes
O No
Does market value dilution occur here?
Yes
No
expand button
Transcribed Image Text:What is the NPV of this investment? (Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round the final answer to the nearest whole dollar. Omit $ sign in your response.) NPV Does accounting dilution occur here? Yes O No Does market value dilution occur here? Yes No
Expert Solution
Check Mark
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Text book image
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:9781260013962
Author:BREALEY
Publisher:RENT MCG
Text book image
Financial Management: Theory & Practice
Finance
ISBN:9781337909730
Author:Brigham
Publisher:Cengage
Text book image
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Text book image
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Text book image
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education