1. Financing choice:

On 26 June 2017, LNK announced that it had entered into a binding agreement to acquire UK-based Capita Asset Management (CAS) for an amount of $1,493 million plus $54 million in transaction costs. To finance the purchase, LNK used a combination of equity ($883 million) and debt ($664 million). The equity funding was to be raised through a fully underwritten renounceable pro-rate entitlement offer (also known as a rights issue). The rights issue was 4 for 11 at an issue price of $6.75. The offers were made to both institutional and retail investors. Detailed information regarding the equity raising can be found in thethis ASX announcement. The debt was to be obtained from existing and new bank facilities.

• If LNK obtained the required funding amount as detailed above, calculate LNK's net leverage ratio (Total Debt - Cash and Cash Equivalents)/Total Equity and Earnings Per Share (EPS) immediately after the transactions,holding all else constant. Use data from the2017 Annual Report as of 30 June 2017 as your base case scenario. Compare the new net leverage ratio and EPS to the base-case leverage ratio and EPS. [Hint: you need to calculate the NLR and EPS for the base case scenario and the new NLR and EPS considering the transactions].
• Evaluate this financing choice, comprising of a combination of debt and equity, taking into account the issue of risk, income, dilution and financing flexibility for future projects. You can use the ratios calculated above to support your evaluation.