You are an entrepreneur starting a biotech firm If you
You are an entrepreneur starting a biotech firm. If you are successful, the technology can be sold for $30m; if unsuccessful, it will be worthless. To fund your work, you need to raise $2m. Angel investors are willing to provide you with the $2m in initial capital in exchange for 50% of the (unlevered) equity in the firm. Please assume perfect capital markets and fill in all the spaces below 
A) The market value of the firm is ____________
B) Suppose you borrow $1m. To raise the additional $1m, you need to sell______________% of the (levered) equity. 
C) The value of your share of the firm’s equity is __________ in part A and______________ in part B.

Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
Relevant Tutors available to help