Entrepreneur starting biotechnology firm

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Reference no: EM132070126

You are an entrepreneur starting a biotechnology firm.

If your research is successful, the technology can be sold for $20 million.

If your research is unsuccessful, it will be worth nothing. To fund your research, you need to raise $2.3million.

Investors are willing to provide you with $2.3million in initial capital in exchange for 30% of the unlevered equity in the firm.

Market value without leverage: $7.7 Million

A. Suppose you borrow $ 0.6 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? The fraction of the firm's equity will you need to sell is?

Reference no: EM132070126

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