*31. You own a firm, and you want to raise $30 million to fund an expansion. Currently,...
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*31. You own a firm, and you want to raise $30 million to fund an expansion. Currently, you own 100% of the firm’s equity, and the firm has no debt. To raise the $30 million solely through equity, you will need to sell two-thirds of the firm. However, you would prefer to maintain at least a 50% equity stake in the firm to retain control.
a. If you borrow $20 million, what fraction of the equity will you need to sell to raise the remaining $10 million? (Assume perfect capital markets.)
b. What is the smallest amount you can borrow to raise the $30 million without giving up control? (Assume perfect capital markets.)
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Related Book For
Fundamentals Of Corporate Finance
ISBN: 9781292018409
3rd Global Edition
Authors: Berk, Peter DeMarzo, Jarrad Harford
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