A pharmaceutical company may be valued at $ million if it gets FDA approval for a key drug being developed, or $ million otherwise, and both scenarios are equally probable. The pharmaceutical company is considering investing $ million in a new project with $ million safe return next year. Using a discount rate of the NPV of the new investment opportunity is $ million calculated as

The pharmaceutical company neither has the $ million available internally, nor can it borrow the $ million. To invest in this project, the pharmaceutical company will need to issue equity. What percentage of the company with the new investment must be sold off to new shareholders to finance the $ million investment? The correct answer is