divisions--lodging division‚ restaurant division and contract service division. Marriott uses Weighted Average Cost of Capital (WACC) as the hurdle rate‚ and use it to discount the appropriate cash flows when evaluate an investment project. Our goal is to determine the WACC at every division base on the information that the case has provided. First of all‚ we will determine the cost of debt‚ cost of equity and the capital structure for the whole company. Then we will compute for the tax rate‚ and calculate
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1. What is the weighted average cost of capital for Marriot Corporation? Briefly outline the key assumptions that you made in computing the WACC. 2. What is the cost of capital for the lodging and restaurant divisions of Marriot Corporation? Briefly outline the key assumptions that you made in computing the cost of capital and outline any limitations that are presented by your analysis. 3. If Marriot uses a single company-wide cost of capital for evaluating investment opportunities in each of its
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Marriot Corporation: Cost of Capital By Xue Fan Background Marriott Corporation began in 1927 with J. Willard Marriott’s root beer stand. Over the next 60 years‚ the business grew into one of the leading companies in industry in United States. In 1987‚ Marriott’s sales grew by 24% and its return on equity stood at 22%. Sales and earnings per share had doubled over the previous 4 years‚ and the company strategy was aimed at continuing this trend. Marriot Corporation had three major lines
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1. Marriott uses its’ cost of capital estimates to create a hurdle rate to effectively run operations. Marriott uses these estimates to operate its four financial strategies. These are managing rather then owning hotel assets‚ investing in projects that increase shareholder value‚ optimizing the use of debt in the capital structure and repurchasing undervalued shares. If the company uses its overall WACC it may have divisions accept projects with returns below their respective WACC which will result
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The problems to estimate the cost of capital Before starting to describe the problems associated to the estimation of the cost of capital‚ it is extremely relevant to describe its meaning: according to Investopedia‚ it is “the cost of funds used for financing a business”. In order to carry out this process‚ the companies can only be financed through equity; only through debt; or using a “combination of debt and equity” - in this particular case it is a “overall cost of capital derived from a
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Did slavery make sense economically? Slavery has always been a controversial issue within the United States. Whether one considers its involvement with the Civil War or its obvious racial subjugation‚ slavery is thought to have been one of the most debilitating elements of American history. Slave labor‚ which profoundly embedded itself within both Southern and Northern societies‚ provided a method of economy for those who relied heavily on agriculture‚ while others were more concerned with industrialization
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English 1010 L-25 Does Legalizing Marijuana Really Make Sense? Should marijuana be sold freely and made available to everyone? To me it makes somewhat sense. There are several beneficial effects as well as there are some very not as much. The debate over the legalization is very heated here in the United States. Marijuana is legal in some states for medical purposes only and others have not quite been convinced of the cannabis. Our newly re-elected president‚ Barack Obama‚ says he is
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long as such evolution is limited to closely related species‚ an example would be lions and tigers. In this instance‚ the processes behind microevolution and macroevolution are the same and extending microevolution to explain macroevolution makes perfect sense. In microevolutionary a good example is House
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Marriot Corporation : the Cost of Capital. In front of Dan Chores is the issue of recommending three hurdle rates for each of Marriott Corporation’s three divisions‚ which have significant effect on the firm’s financial and operating strategies as well as its incentive compensation. Marriott Corporation had three major lines of business: lodging‚ contract services and restaurants. Also Marriott had its growth objective‚ to remain a premier growth company. The four components of
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1) Are the four components of Marriott’s financial strategy consistent with its growth objective? Manage rather than own hotel assets. Profiting from the sale of its hotel assets while still generating revenue from those assets‚ reduces risk increases ROA‚ profitability‚ and frees up cash for other positive NPV opportunities. This process is consistent with its strategy of growth. Invest in projects that increase shareholder value. As long as the company invests in projects with a positive
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