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Corporate Finance Case Discussion : Hong Kong Dragon Airlines Limited: Lease vs Buy Decision

1. Purpose: The purpose of the case is to provide an opportunity for students to : Understand the theory and practice of capital budgeting decision Assess the relative superiority of outright purchase, lease and sale and leaseback arrangements Adjust for risk 2. Issues for Analysis : What are the pros and cons of each option given in the case? Which option did you choose? Provide a quantitative support for your choice. Perform sensitivity analyses to identify the key bets in your decision

3. Additional Data : In doing your analyses, the following additional data may be useful : 1. 2. 3. 4. 5. Tax rate : 17.5% Cost of Debt (before tax) : 5.71% Estimated Market risk premium : 3% Risk Free Rate of Return : 4.18%

: 0.78

4. Assumptions: The data provided in the case is comprehensive. However should any group feel the need to make any assumptions, these must be statedclearly in your submission.The appropriate justification for making assumptions must be provided. 5. Submission Deadline : At the end of 14th. Session. 6. Discussion date :Session 18. All students must be ready to present / explain their approach if called upon by the instructor.It is compulsory that each group be represented in class.