Case Study 2 (50 marks) Unique Corp Ltd is a manufacturer of smart phone. John, the CEO of Unique Corp, has been aware of an acquisition opportunity in the market. The target firm, Stardust Tech, designs and manufactures mobile devices. Its new product, Uranus phone, is well received by the market. Financial analysts forecast that, as a result of the success of the new product, Stardust Tech stock's dividend is expected to grow at 16%p.a. for the next two years. Thereafter, the dividend is expected to grow at 10% p.a. because new competitors are expected to enter the market and the growth of sales of Uranus phone will slow down. The current dividend is $4. John is now considering purchasing the shares of target firm. John seeks for your advice on this issue. f. The current market price of Stardust Tech is $45. John worries that if the news of potential Page 3 of 4 acquisition is leaked out into the market, the stock price of Stardust Tech as well as the cost of acquisition will surge significantly. He wishes to hedge against that risk by using call option or futures contract. The information of the derivatives market is as follow: Call option: Strike price: $45, Expiration date: 1 month later, Type: European Option price: $3. Futures: Futures price: $46, Expiration date: 1 month later. Please advise appropriate derivatives strategies for John. Illustrate your answer with tables or diagrams. (15 marks)