Metallica Heavy Metal Mining Corporation wants to diversify its operations. Some recent financialsinformation on the company is listed below: Stock Price $73 # of Shares 40,000 Total Assets $7,600,000 Total Liabilities $2,200,000 Net Income $440,000 The company is considering aninvestment that has the same PE Ratio as the firm. The cost of investment is $800,000 and it will befinanced with a new equity issue. The return on investment will equal the company's current ROE.Current Book Value Per Share $135.00 New Book Value Per Share $121.30 Current market To Books.5407 New Market to Books .5409 Current EPS $11.00 New EPS $9.89 What is the NPV of theinvestment? If negative please note with minus sign and be rounded to nearest who dollar.

Return on investment:Return on Investment (ROI) stands as a pivotal metric in assessing the…

Answered: Metallica Heavy Metal Mining…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Check my work Consider a firm with an EBIT of $866,000. The firm finances its assets with $2,660,000 debt (costing 8 percent and is all tax deductible) and 560,000 shares of stock selling at $5.00 per share. To reduce the firm's risk associated with this financial leverage, the firm is considering reducing its debt by $1,000,000 by selling an additional 360,000 shares of stock. The firm's tax rate is 21 percent. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $866,000. Calculate the change in the firm's EPS from this change in capital structure. (Do not round intermediate calculations and round your final answers to 2 decimal places.) EPS before EPS after Difference
You have the following information about Burgundy Basins, a sink manufacturer. Equity shares outstanding 20 million Stock price per share $ 40 Yield to maturity on debt 6.5% Book value of interest-bearing debt $ 355 million Coupon interest rate on debt 4.5% Market value of debt $ 250 million Book value of equity $ 420 million Cost of equity capital 12.0% Tax rate 35% Burgundy is contemplating what for the company is an average-risk investment costing $40 million and promising an annual ATCF of S 5.0 million in perpetuity. What is the IRR on the investment? What is the WACC on the investment?
Bhupatbhai
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You are working in the Finance Department of Ranch Manufacturing, and your supervisor has asked you to compute the appropriate discount rate to use when evaluating the purchase of new packaging equipment for the plant. Under the assumption that the firm’s present capital structure reflects the appropriate mix of capital sources for the firm, you have determined the market value of the firm’s capital structure as follows: Bonds $4,000,000 Preferred stocks $2,000,000 Common Stock $6,000,000 To finance the purchase, Ranch Manufacturing will sell 10-year bonds paying interest at a rate of 7 percent per year (with interest paid semi-annually) at the market price of $1,050. Preferred stock paying a $2.00 dividend can be sold for $25. Common stock for Ranch Manufacturing is currently selling for $55 per share, and the firm paid a $3 dividend last year. Dividends are expected to continue growing at a rate of 5 percent per year for the indefinite future. If the firm’s tax rate is 30…
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