Question:With the data below solve each problem.
1. You are an entrepreneur starting a biotechnology company. If your research is successful, the technology can be sold for $ 30 million. If your research is unsuccessful, it will not be worth anything. To fund his research, he needs to raise $ 2 million. Investors are willing to provide $ 2 million in initial capital in exchange for 25% of unleveraged capital in the company. Take on a perfect market.
to. What is the total market value of the company without leverage? _______
B. Suppose you borrow $ 1 million. According to MM, what fraction of the capital of the company will have to sell to raise the additional million that it needs? _____.
2. If the total investment of the company is for $ 8,750,000 and level of debt to capital is 40%, the capital would amount to $ ______________.
3. If the net profit of the company is distributed in 50% dividends and capital, which section of the capital structure of the company will be affected. __________
4. Under a perfect market, a company with an EPS of $ 2.25, a financing rate of 7.5% and a market share price of $ 15.00 has a P / E ratio of ___________.