The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for the company is shown here:
Stock price $ 73
Number of shares 40,000
Total assets $ 7,600,000
Total liabilities $ 2,200,000
Net income $ 440,000
MHMM is considering an investment that has the same PE ratio as the firm. The cost of the investment is $800,000, and it will be financed with a new equity issue. The return on the investment will equal MHMM’s current ROE.
What is the NPV of this investment?