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SOVA2 [1]
3 years ago
12

You are an entrepreneur starting a biotechnology firm. If your research is​ successful, the technology can be sold for $ 30$30 m

illion. If your research is​ unsuccessful, it will be worth nothing. To fund your​ research, you need to raise ​$2.02.0 million. Investors are willing to provide you with ​$2.02.0 million in initial capital in exchange for 50 %50% of the unlevered equity in the firm. a. What is the total market value of the firm without​ leverage? b. Suppose you borrow ​$1.01.0 million. According to​ MM, what fraction of the​ firm's equity will you need to sell to raise the additional ​$1.01.0 million you​ need? c. What is the value of your share of the​ firm's equity in cases ​(a​) and ​(b​)? a. What is the total market value of the firm without​ leverage?
Business
1 answer:
yanalaym [24]3 years ago
4 0

Answer:

a. What is the total market value of the firm without​ leverage?

  • = $2 million / 50% = $4 million

b. Suppose you borrow ​$1.0 million. According to​ MM, what fraction of the​ firm's equity will you need to sell to raise the additional ​$1.0 million you​ need?

  • = 33.33%

c. What is the value of your share of the​ firm's equity in cases ​(a​) and ​(b​)?

  • a) = $4 x 50% = $2 million
  • b) = $2 million

Explanation:

if successful price = $30 million

if unsuccessful price = $0

investment required = $2 million

in exchange of 50% of the firm

if you borrow $1 million, you will have to give up 33.33% of the company in exchange for the other $1 million needed

= $1 / ($4 - $1) = $1 / $3 = 33%

according to Modigliani and Miller (MM), the value of a firm is determined by its profit.

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4 0
3 years ago
Inventory Ratio Calculations
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Answer:

Inventory Turnover Ratio for 2008=  3.223 Times

Inventory Turnover Ratio for 2009= 3.91 times

Explanation:

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7 0
3 years ago
Benson Concrete Company pours concrete slabs for single-family dwellings. Lancing Construction Company, which operates outside B
wolverine [178]

Answer:

It should accepted.

Explanation:

\left[\begin{array}{cccc}&Units&Cost&Total\\$Special Order&49&2,590&126,910\\$Variable Cost&49&1,440&-70,560\\$rejected local&&&0\\$additional cost&&&0\\$Net Income&&&56350\\\end{array}\right]

We will compare the Special order with the variable cost associate with their productions.

As the orders has a postive income after variables expenses it should be accepted as contributes with the payment of fixed cost and this sales wasn't planned when solvign for the cost. Not doing the sale will avoid the comapny the opportunity of a profitable business cappable of allocate more fixed cost.

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Which careers require a person to find independence in working alone?
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Visual Arts??

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When they work on every visual art project, the artists want to be isolated and away from anyone. Few examples of visual artwork are architecture, craft, painting, and photography, and a lot more can be applied to this category. In any situation, though the artist likes solitude and being alone since it means that they are closer to nature, and can therefore rely more on their work that can be ruined by even the slightest flaw.

3 0
3 years ago
What is the net present value of a project with the following cash flows if the required rate of return is 9 percent?
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<span>Year Cash Flow
0 -$46,400 
1 18,000 
2 33,530 
3 4,600</span>

<span>NPV = -$46,400 + $18,000 / (1 + 0.09) + $33,530 / (1 + 0.09)2 + $4,600 / (1 + 0.09)3 = 

</span><span>-$1,574.41</span>

7 0
3 years ago
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