The Metallica Heavy Metal Mining (MHMM) Corporation Wants to Diversify

Multiple Choice

The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations.Some recent financial information for the company is shown here: MHMM is considering an investment that has the same P/E ratio as the firm.The cost of the investment is $800,000, and it will be financed with a new equity issue.What would the ROE on the investment have to be if we wanted the price after the offering to be $115 per share? Assume the PE ratio remains constant.

A) 18.28 percent
B) 21.41 percent
C) 27.63 percent
D) 37.27 percent
E) 40.03 percent