You own your own firm, and you want to raise $30 million to fund an expansion. Currently, you own 100% of the firm's
Posted: Fri Jul 01, 2022 7:47 am
You own your own firm, and you want to raise $30 millionto fund an expansion. Currently, you own 100% ofthe firm's equity, and the firm has no debt. To raise the$30
million solely through equity, you will need tosell two-thirds of the firm. However, you would preferto maintain at least a 50% equity stake in the firm to retaincontrol. a. If you borrow $15 million, what fraction of the equitywill you need to sell to raise the remaining $15 million? (Assumeperfect capital markets.)b. What is the smallest amount youcan borrow to raise the $30 million without givingup control? (Assume perfect capital markets.)
million solely through equity, you will need tosell two-thirds of the firm. However, you would preferto maintain at least a 50% equity stake in the firm to retaincontrol. a. If you borrow $15 million, what fraction of the equitywill you need to sell to raise the remaining $15 million? (Assumeperfect capital markets.)b. What is the smallest amount youcan borrow to raise the $30 million without givingup control? (Assume perfect capital markets.)