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QUESTION
The Cuba Project Santiago Old Car Parts (SOCP) is considering a new venture (or project) that hopes to take advantage of the opening of business...
WACC + 2
The Cuba project is considered to be "High risk".
Given all of the information provided in this case:
(Show your work, calculations, and explain your answers well)
- What is the firm's current Weighted Average Cost of Capital (WACC) at its current capital structure.
- Capital Structure theory addresses finding a firm's optimal capital structure. How do you determine the optimal capital structure?
- What is the SOCP's optimal capital structure (Complete the Cost of Capital & Capital Structure worksheet)?
- Define Hurdle rate. Based on SOCP's current capital structure, what is the appropriate Hurdle Rate for the Cuba project?
