You are an entrepreneur starting a biotechnology firm. If your research is​ successful, the technology can be sold for $30 million. If your research is​ unsuccessful, it will be worth nothing. To fund your​ research, you need to raise $2.0 million. Investors are willing to provide you with $2.0 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. 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?

c. What is the value of your share of the​firm's equity in cases

​(a​)

and

​(b​)?