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FIN351 CORPORATE FINANCE STUDY GUIDE (5CU) Course Development Team Head of Programme : Dr Ding Ding Course Developer(s) : Dr Ding Ding and Prof...
Question 1
The Jumbo Group restaurant chain launched its initial public offering (IPO) in October 2015. As a financial analyst of Tiger Investment Fund, your boss has requested for you to brief her on this investment opportunity.
Required:
Draft a memorandum on covering the following matters:
(a) Describe the listing requirements and process of issuing equity securities on SGX Catalist and the indicative timetable of Jumbo's IPO.
(15 marks)
(b) Discuss the role of UOB Limited in this IPO.
(8 marks)
(c) Analyse the costs (direct and indirect) associated with Jumbo's IPO.
(10 marks)
(d) Calculate the total amount of cash raised in this offering and describe the use of the proceeds.
(10 marks)
(e) Analyse the effect of dilution on existing shareholders in respect of new shares being issued.
(7 marks)
Question 2
On 1 January 2016, Fu Yu Ltd leased an equipment with a market value of $40 million and useful life of five years. The terms of the lease are as follow:
Lease term of 60 months.
Effective interest rate of 8%.
Instalments of $800,000 to be paid at the end of each month.
During the lease period, Fu Yu is responsible for maintain the insuring the equipment. It ownership of the equipment will be transferred to Fu Yu at the end of the lease term. The firm's financial year end is 31 December.
Required:
(a) Explain why this lease is classified as a finance lease.
(12 marks)
(b) Prepare the accounting entries for FY 2016 associated with this finance lease.
(9 marks)
(c) Discuss the financial implications if Fu Yu treated this transaction as an operating
lease.
(9 marks)
Question 3
Sometime in November 2015, Singapore Airlines ("SIA") launched its takeover offer for Tiger Airways with the intention of delisting and privatising the budget carrier. By February 2016, SIA's stake in Tiger Airways rose to more than 90%.
Required:
(a) Identify the type of general offer made by SIA for Tiger Airways and describe the key events in connection with the takeover process.
(10 marks)
(b) Identify, with reason(s), the type of acquisition made by SIA and analyse the rational of acquiring Tiger Airways.
(10 marks)
- Attachment 1
- Attachment 2
