Highlights
Scenario You have been hired as a financial consultant by Stark Enterprise Ltd. which is a publicly listed company. Stark Enterprise Ltd. intends to raise additional funds to expand operation overseas, a vision the CEO Mr. Tony Stark is very keen to pursue.
The CFO Mr. Phil Coulson suggested that Stark Enterprise issue share options that will convert to a new class of ordinary shares later. Tony Stark is not confident that issuing share options would be the best strategy to raise the additional funds. In Mr. Stark’s request to you- the financial consultant, he would like to know your thoughts on the following matters:
i. If Stark Enterprise Ltd. decides to issue share options, what effect(s) will this have on the basic and diluted EPS of the company?
ii. What are the other alternatives apart from issuing share options available for Stark Enterprise Ltd. to raise additional funds for this expansion plan without borrowing?
iii. Based on your discussion in (ii.) above identify at least TWO funding strategies you think would be better than issuing share options and why?
Required: Write a short memorandum format report to the CEO Mr. Tony Stark to answer his questions. Your report should cover all three questions/issues raised by Mr. Stark. Each question should be answered under a sub-heading within the report with appropriately cited references.
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