Business, 05.05.2020 04:06 tynasiaparks13

You are an entrepreneur starting a biotechnology firm. If your research is successful, the technology can be sold for $ 31 million. If your research is unsuccessful, it will be worth nothing. To fund your research, you need to raise $ 2.5 million. Investors are willing to provide you with $ 2.5 million in initial capital in exchange for 25 % of the unlevered equity in the firm. a. What is the total market value of the firm without leverage? b. Suppose you borrow $ 0.8 million. According to MM, what fraction of the firm's equity will you need to sell to raise the additional $ 1.7 million you need? c. What is the value of your share of the firm's equity in cases (a) and (b)?

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You are an entrepreneur starting a biotechnology firm. If your research is successful, the technolog...

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