The Hagerman Heavy Metal Mining (H2M2) Corporation wants to diversify its operations. Some recent financial information for the company is shown here: Stock price 67 Number of shares 35,000 $8,100,000 $4,900,000 $ 750,000 Total assets Total liabilities Net income 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 $ 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 ir your response.) Current earnings per share New earnings per share 2$
The Hagerman Heavy Metal Mining (H2M2) Corporation wants to diversify its operations. Some recent financial information for the company is shown here: Stock price 67 Number of shares 35,000 $8,100,000 $4,900,000 $ 750,000 Total assets Total liabilities Net income 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 $ 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 ir your response.) Current earnings per share New earnings per share 2$
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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14) Can i please get help with this practice question.
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
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
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