Question is provided in the screenshot below:

{a} ABC rm has outstanding one million shares with a total market value of $33! million. The rm is expected to pay $1 million of dividends next year, and thereafter the amount paid out is expected to grow by 5% a year in perpetuity. Thus the expected dividend is $1115 million in year 2, $1.105 million in year 3 and so on. However the company has heard that the value of a share depends on the flow of dividends, and therefore it announces that next year's dividend will be increased to $2 million and that the extra cash will be raised immediately by an issue of shares. After that, the total amount paid out each year will be as previously forecasted, that is, $1.05 million in year 2 and increasing by 5% in each subsequent year. Required: (i) At what price will the new shares be issued in the year 1? [2D marks] [ii] How many shares will the rm need to issue? [10 marks] {iii} What will be the expected dividend payments on these new shares, and therefore what will be paid out to the old shareholders after the year 1? [10 marks] [iv] Show that the present value of the cash flows to current shareholders remains $2mil|ion. [1|] marks] {b} Miller and Modigliani (HM) insisted that payout policy should be analysed holding debt and investment policy constant. Why? Explain your answer with reasoning. [30 marks] [In] An equity repurchase will always provide a lesser signaling benet than an equivalent dollar increase in regular dividends. Explain this phenomenon. Does this scenario hold true if the equity repurchase is compared to special dividends? [ED marks]