Doral Costa Case Study Solution
Deal Structure and Feasibility
The feature of the proposed deal by Trammell Crow to QRS,is that QRS will be sole owner and it will put-up 40% in the total cost of the equity. The remaining 60% cost would be in debt with the lender, who would provide loan at 8% interest cost. Trammell Crow would receive 25 % as a bonus fee, when QRS would receive its entire initial capital and 15% as return on equity.
The deal is feasible to them, because they can prepay the loan at any time, without facing any penalty. QRS would have all the rights and control over the project. There wouldn’t be any interference by anyone. They will be the sole owner of the project. QSR will be responsible for all the risks and rewards associated with the project.
Recommendations
It is been recommended to Cabrera, that investing in the project will be beneficial for them. Cabrera would have rights to make decisions in the project, and would also have shares in returns.Although this deal is feasible for QRS, but it will bear some of the cost and risk would be distributed between them. In this, the Cabrera’s company won’t face many risks in the project. It can either make an investment through equity or borrow money from any financial institute. In both of the financing strategies; the company doesn’t need to make a huge investment, which would help it in having low cost of interest and a few amount of profit would be shared with the shareholders, if they finance the project by issuing shares...............................
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