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You are an entrepreneur starting a biotechnology firm. If your research is successful, the technology can be sold for $ 3 4 million. If your

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 $ 2.2
million. Investors are willing to provide you with $ 2.2
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 $ 0.9
million. According to MM, what fraction of the firm's equity will you need to sell to raise the additional $ 1.3
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 $ 0.9
million. According to MM, what fraction of the firm's equity will you need to sell to raise the additional $ 1.3
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.)

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