Exams

Please answer the following questions:

a. What is the business problem/challenge that Marriott is faced with? - 10 marks

b. Analyze and discuss Figure A in the case study. What is your assessment of Mr. Cohrs’ assertion that profitability decreases for increases in Marriott’s hurdle rate? – 10 marks

c. What are the costs of capital for the three different divisions (lodging, contract services, and related business)? Calculate the WACC for each and clearly describe your assumptions and methods – 24 marks (8 marks for each division)

d. If you were a financial analyst in Marriott’s corporate finance division, what would be your recommendation to the CFO regarding the Marriott cost of capital for use in analyzing future projects? – 16 marks

e. How would you interpret the Beta of 0.97 and describe this to a potential investor in the company? How does this Beta compare to Marriott’s competitors? - 10 marks

f. Mr. Cohrs is concerned about the timeframes associated with the measurements in Figures 4 and 5. What would be your recommendation as to which method (geometric or arithmetic) should be used for your analysis? – 10 marks

g. What would be your recommendation to the CFO for future project investments? Specifically, which portion of the Marriott business appears to be the most profitable and suitable for future investment? – 10 marks

h. If the Marriott CFO asked for you to determine the “health” of the company, how would you answer this question relative to the data provided in the case study? Consider the use of historical, longitudinal data provided in the data tables. – 10 marks

In your answers, in addition to the information from the Case Study, please apply the concepts from the appropriate areas of financial and economic theory, discussed during this and all previous modules during your course. Your answers should include appropriate numerical data and, if appropriate, charts/graphs. In particular for Questions C and G you must provide a separate MS Excel file which will contain supporting calculations (with formulae).

In answering Question E, please find and analyse the appropriate information about Marriott competitors. You may wish to create the short information summaries about selected competitors and attach them to your main report as enclosures (not included in the word count for the assignment). Wherever possible you should support your answers with examples of actual firms facing similar problems, based either on class discussions or on your general knowledge.