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The Metallica Heavy Metal Mining (MHMM) Corporation wants todiversify its operations. Some recent financial information for thecompany is shown here: Stock price$64 Number of shares40,000 Total assets$8,200,000 Total liabilities$4,000,000 Net income$700,000 MHMM is considering an investment that has the same PE ratio asthe firm. The cost of the investment is $800,000, and it will befinanced with a new equity issue.The ROE on the investment would have tobepercenthe offering to be $64 per share (assume the PE ratio remainsconstant), and the NPV of the investment would beoccur in this case. Market value dilutionoccur in this case.Accounting dilution
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