Question: QUESTION 11 5 points Save Answer Consider a rm that only has a patent as its assets If not developed any further, the value of

QUESTION 11 5 points Save Answer Consider a rm that only has a patent as its assets If not developed any further, the value of the patent will only be $19 million at the end of the year. The rm has long-term debt of $28 million, which is due at the end of the year. However, the rm can develop its patent with an upfront cost of $24.5 million. The developed patent will have a value of $5025 million at the end of the year. Suppose the risk-free interest rate is 12%, assume all cash ows are risk-ee, and assume there are no taxes. a. What are the rm's debt and equity values today if it decides not to develop its patent any further (1 mark)? h. Let us assume that the rm decides to develop its patent further. What is the NPV of developing the patent (2 marks)? 0. Suppose the rm raises $245 million 'om equity holders to develop the patent. In this scenario, calculate the rm's debt and equity values as of today (2 marks). For the toolbar, press ALT+F1D (PC) or ALT+FN+F1O (Mac) B I Ll 5 Paragraph V Opensans,s... v 10m V EEV EEV AV I v 1; 3g [E] Q 6) (9 z: E IIII |||| Il Il x\" 3' Q3 P 0 WORDS POWERED BY TINY 1

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