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>The ABC Company belongs to a risk class for which the appropriate discount rate is 10 percent. ABC currently has 240,000 outstanding shares selling at $105 each. Assume there are no taxes on dividends. Answer the following questions based on the Miller and Modigliani model, which is discussed in the text.

>If ABC makes $5.8 million of new investments at the beginning of the period, earns net income of $1.9 million/year for 5 years, how many shares of new stock must the firm issue to meet its funding needs?
>If ABC Company uses a rights offering with the subscription price $80 to meet its fund needs, what is the ex-right price and the value of right?


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