MARRIOTT INTERNATIONAL, INC. is a leading worldwide hospitality company, with operating units in the United States and 53 other countries and territories. Major businesses include hotels operated and franchised under the Marriott and other International brands, restaurants, and food service distribution. The company headquarters are in Washington, D. C.
The vice president of project finance at Marriott Corporation, prepares recommendations annually for the hurdle rates at each of the firm¡¯s three divisions. In this reflective case, the company¡¯s policies and strategies related with hurdle rates and cost of capital are discussed. In the above context, the company¡¯s policy of repurchasing its shares is also reviewed ; particularly, it focuses on the financial effects there may be if there is a 30% repurchase of the common stock.
For practical purposes, this paper is organized in four sections : first, a review of the financial performance of the company as a background for the general discussion ; the second section refers to the common stock of the company including the evolution of Marriott¡¯s shares in the market and repurchasing policy ; a third section focuses on the company¡¯s policies for project evaluation ; and finally cost of capital and capital structure is boarded in the fourth section. All the four sections refer to the ten-year period from 1978 to 1987 in accordance with the information provided by the text case, and it is assumed that if there were a 30% repurchase of Marriott¡¯s common stock it would be done in 1988.
2. Financial Performance
This section reviews Marriott¡¯s financial performance based upon ratio analysis. In regards to the assets turnover, Marriott¡¯s ratio has grown from 1.17 in 1979 to 1.40 in 1982 (see exhibit 1), while from 1983 this ratio diminished to 1.29 and it was more stable. It is my assumption that assets turnover ratio diminished due to new hotels, restaurants and other fixed...