Determine the total market value of the firm

Assignment Help Microeconomics
Reference no: EM1374732

Suppose you are an industrialist begninning a biotechnology company. If your research is successful, technology can be sold for $30 million. If your research is unsuccessful, it will be worth nothing. To amount your research, you need to increase $2 million. Investors are willing to provide you with $2 million in initial capital in exchange for 50% of the unlevered equity in the firm.
A.What is the total market value of the firm without leverage?
B.Assume you borrow $1 million. According to MM, what fraction of the firm's equity will you need to sell to raise the additional $1 you need?
C.What is the value of your share of the firm's equity in cases A and B.?

Reference no: EM1374732

Questions Cloud

Evaluate what is tax effect fir brian : Evaluate what is tax effect fir Brian and what will be basis of each of four batches of new stock?
Find out best combination of compost and topsoil that meets : Find out best combination of compost and topsoil that meets stated conditions at lowest cost per bag. Classify lowest cost possible.
Job evaluation at whole foods and quota case study : Job Evaluation at Whole Foods and quota Case Study. The Whole Foods Market has finished a job analysis as well as written job descriptions for Jobs A thorough Job I.
Explain how much could industry save annually in ordering : Currently manager orders once a month. Explain how much could industry save annually in ordering and carrying costs by using EOQ.
Determine the total market value of the firm : Suppose you are an industrialist begninning a biotechnology company. If your research is successful, technology can be sold for $30 million. If your research is unsuccessful, it will be worth nothing.
Illustrate what is best way to resolve this situation : Is this situation a result of poor supervision or employees thinking that re is nothing wrong because every1 else is surfing. Do you think that this is a reflection of our changes in society.
What is the subsequent new theory called : What is the subsequent new theory called: 'under which firms could be held liable if their stock prices fell meaningfully when the firms' projections of future earnings had been favourable
Find what alfred''s basis for gain : Gift taxes paid on property were $3,000. Find what Alfred's basis for gain is and what is his basis for loss?
Illustrate what supply challenge would red fish-blue fish : Illustrate what supply challenge would Red Fish, Blue Fish, face in expanding into South America. Do you recommend expanding aggressively into South America. Explain why or why not.

Reviews

Write a Review

Microeconomics Questions & Answers

  Long-run total cost-long-run average cost

The production engineers at Impact Industries have derived the optimal combinations of labor and capital (the only two inputs used by Impact) for three levels of output: 120, 180, and 240 units of output:

  Question about price elasticity

Choose a product and state whether it has price elasticity or price inelasticity. The beginning value for year 2008 is $43,050, year 2007 starting price was $41,450,  and year 2006 beginning price was $42,700.

  Computing profit maximizing price and output level

Derive the profit maximizing price and the profits at this price. What is the demand elasticity at this price? What is the total demand when the monopolist charges a price P?

  Question about pricing and promotion

A television station is planning the sale of promotional DVDs. It can have DVDs manufactured by one of two suppliers. Supplier A will charge the station a set-up fees of $1,200 plus $2 for each DVD.

  Security and encryption

Discuss how Internet security measures can actually create opportunities for criminals to steal, rather than prevent them.

  Find total revenue

Find Total Revenue or profit

  How to regulate the nations banks

A Federal Reserve Bank has employed the economic consulting company to make a paper on how the use of money has changed over the past twenty years.

  Question related to elasticity

Make a research on the elasticity of beef and eggs in regards to price changes and explain how do supply, demand, and price controls interact to affect equilibrium price of eggs?

  Economic output problems

Write down a paragraph explaining how the Hernandez Corp. finds the least cost combination of inputs for producing the given rate of output.

  Factors in michael porter five forces model

What are the major reasons a multinational corporation would engage in Foreign Direct Investment (FDI)? Explain the factors in Michael Porter's "Five Forces Model" which affect the capability of any firm in an industry to earn the profit.

  Application of price elasticity of demand

The Haas Corporation's executive vice president circulates the memo to the firm's top management in which he argues for reduction in price of firms product. He says such a price cut will raise the firms sales and profits.

  Derive the profit function

Consider the problem of maximizing the profit function (pi)= pY -wL subject to the production function Y= L to the alpha (as the exponent) where alpha E (epsilon) (0,1).

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd