What is the total market value of the firm without leverage

Assignment Help Financial Management

Reference no: EM132071401

You are an entrepreneur starting a biotechnology firm. If your research is successful, the technology can be sold for $ 29 million. If your research is unsuccessful, it will be worth nothing. To fund your research, you need to raise $ 4.1 million. Investors are willing to provide you with $ 4.1 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 $ 0.7 million. According to MM, what fraction of the? firm's equity will you need to sell to raise the additional $ 3.4 million you need?

c. What is the value of your share of the firm's equity in cases a and b?

Reference no: EM132071401

Questions Cloud

What is the difference between the NPV of each machine : Machine A costs $15,000 and will last 5 years, What is the difference between the NPV of each machine.

What is the best Time Period for NPV or NFV analysis : What is the best (MOST EFFICIENT) Time Period for an NPV or NFV analysis (years).

Compute the annual equivalent cost of each machine : Compute the Annual Equivalent Cost of each machine and subtract those values.

How accounting information can be used to assist in process : What agency problems the bank should be concerned with and how accounting information can be used to assist in this process.

What is the total market value of the firm without leverage : What is the total market value of the firm without leverage? What is the value of your share of the firm's equity in cases a and b?

Trade credit is lower than the bank interest rate : Which of the following strategies should cash-strapped firm adopt if the effective interest rate charged on trade credit is lower than the bank's interest rate?

Expected annual return for investment : Sasha owns two investments, A and B, that have a combined total value of 36.300 dollars. What is R, the expected annual return for investment B?

Suitable cost estimation technique for your term project : Critically describe five cost estimation techniques, explain with reasons the most suitable cost estimation technique for your term project.

Annual rate implied from the past and expected values : If Fatima expects to earn the same annual return after 1 year from today as the annual rate implied from the past and expected values given in the problem,

User Account

All Pages