ONLY NEED PART C ANSWERED

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 $3.4 million. Investors are willing to provide you with $3.4 million in initial capital in exchange for 30% of the unlevered equity in the firm.

a. What is the total market value of the firm without leverage?

Answer=11.3 million

b. Suppose you borrow $.5 million. According to MM, what fraction of the firms equity will you need to sell to raise the additional $2.9 million you need?

Answer: You will need to sell 27%

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