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What is the total market value of the firm without leverage

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Question - You are an entrepreneur starting a biotechnology firm. If your research is? successful, the technology can be sold for $24 million. If your research is? unsuccessful, it will be worth nothing. To fund your? research, you need to raise ?$2.9 million. Investors are willing to provide you with ?$2.9 million in initial capital in exchange for 35% 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 ?$2.2 million you? need?

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

Reference no: EM133018992

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