Question 4 a) Explain the differences between recourse and non-recourse lending and outline when each could be used in project finance. b) Briefly explain the economic benefits of a share buy-back from the perspective of a company. c) Memphis Ltd is currently undergoing an equal access share buy-back scheme. The market price of Memphis Ltd is $10.00 per share. The off-market buy back price was announced at $9.50 per share, where the capital component of the offer is $3.50 per share and a fully-franked dividend is $6.00 per share. Corporate tax rate is 30 percent. A hedge fund, Luxor LLC, has recently become a shareholder in Memphis Ltd by acquiring a 3.5 percent ownership in Memphis Ltd. Luxor LLC has also rejected participating in this buy back scheme at the current share price. Luxor LLC however made a counter offer to Memphis Ltd last Monday to tender all its shareholdings in Memphis Ltd at the price of $10.10 per share. Luxor LLC has then been accused of 'green mail' by Memphis Ltd management. Discuss the following: i. Outline possible reasons why Memphis Ltd management accused Luxor LLC of 'green mail'. ii. Advise a domestic retail shareholder (who has a marginal tax rate of 32.5 percent) and a superannuation fund (15 percent tax rate) whether either of them should participate in Memphis Ltd's Equal Access share buy back. Assume that shares in Memphis Ltd were bought by the retail investor and the superannuation fund more than a year ago at a price of $3.50 per share