Question: 7 . A tech startup is wholly owned by its founder and has no debt. The founder plans to raise $ 9 million in additional

7 .

A tech startup is wholly owned by its founder and has no debt. The founder plans to raise $

9

million in additional capital to fund the development of a new app. Some of the new capital will be debt, in the form of a perpetuity, and the remainder will be new equity issued to a venture capitalist. After developing the app, the unlevered value of the firm will be $

15

million. What is the minimum amount of debt the company must issue for the founder to retain control of the firm?

Answer:

1.0

million

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