You are an entrepreneur starting a biotechnology firm. If your research is$$ successful, the technology can be sold for $ $34$

million. If your research is$$ unsuccessful, it will be worth nothing. To fund your$$ research, you need to raise $ $2\mathrm{.}2$

million. Investors are willing to provide you with $ $2\mathrm{.}2$

million in initial capital in exchange for $50\%$

of the unlevered equity in the firm.

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

b$.$

Suppose you borrow $ $0\mathrm{.}9$

million. According to$$ MM$,$ what fraction of the$$ firm's equity will you need to sell to raise the additional $ $1\mathrm{.}3$

million you$$ need?

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

and $($b$)?$

Question content area bottom

Part $1$

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

The market value without leverage is $$$enter your response here

million.$($Round to one decimal$$ place.$)$

Part $2$

b$.$

Suppose you borrow $ $0\mathrm{.}9$

million. According to$$ MM$,$ what fraction of the$$ firm's equity will you need to sell to raise the additional $ $1\mathrm{.}3$

million you$$ need?

The fraction of the$$ firm's equity you will need to sell is enter your response here

$\%.$

$($Round to the nearest whole$$ percentage.$)$

Part $3$

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

and $($b$)?$

The value of your share of the$$ firm's equity in case $($a$)$

is $$$enter your response here

million.$($Round to one decimal$$ place.$)$

Part $4$

The value of your share of the$$ firm's equity in case $($b$)$

is $$$enter your response here

million.$($Round to one decimal$$ place.$)$