You are an entrepreneur starting a biotechnology firm. If your research is? successful, the technology can be sold for $ 29 million. If your research is? unsuccessful, it will be worth nothing. To fund your? research, you need to raise ?$5.6 million. Investors are willing to provide you with ?$5.6 million in initial capital in exchange for 25 % of the unlevered equity in the firm.
a. What is the total market value of the firm without? leverage?
b. Suppose you borrow ?$0.3 million. According to? MM, what fraction of the? firm's equity will you need to sell to raise the additional ?$5.3 million you? need?
c. What is the value of your share of the? firm's equity in cases ?(a?) and ?(b?)?