Marriott Corporation The Cost of Capital Author Student Number 董晖 林桐 吴正浩 祝承懿 Shanghai Advanced Institute of Finance‚ Shanghai Jiao Tong University Table of Contents Background The hurdle rate is the required return or opportunity cost of each division and company. Only project with positive NPV discounted by hurdle rate will be invested‚ and the total return of Marriott up to all projects invested. Though there are many subjective aspects in estimation
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FBE 421 Marriott Corporation ------------------------------------------------- Introduction Founded in 1927‚ Marriott Corporation has become one of the leading food service companies in the United States. As of 1987‚ Marriott recorded a profit of $233 million on sales of $6.5 billion and retained a high sales growth rate of 24%. Marriott runs on three major lines of business lodging‚ contract services‚ and restaurants. Lodging division which includes 361 hotels generated 41% of 1987 sales
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Marriott Corporation: The Cost of Capital (Abridged) 1. How does Marriott use its estimate of cost of capital? Does this make sense? Marriot use cost of capital as the hurdle rate (minimum rate of return required to accept the project) to discount future cash flows for the investment projects of the three lines of business (Lodging‚ Contract Services and Restaurants). They use this rate to calculate NPV and net present value over cost to decide for the profit rate. Since cost of the project
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Marriott Corporation Jacob Piquette Jingjin Cen Chen Huo Wenkao Wu Accurately Measuring Debt Capacity For Marriott Corporation While management was correct in some aspects of measuring debt capacity for Marriott Corporation‚ the method used to obtain the ratio of 6.64 did not include the debt from the previous repurchase‚ grossly overstating the ratio and leading to believe that Marriott Corporation had a large unsused portion of debt capacity. This is shown in Exhibit 5. After thorough analysis
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Marriott Corporation: The Cost of Capital April 2012 Executive Summary Determining the appropriate cost of capital for new investment projects for a diversified company like the Marriott Corporation is not an easy endeavor. However‚ it is an important exercise because the more effective the process‚ the better it can help to support the company’s growth objective with its financial strategy. The four components of the financial strategy are: manage rather than own hotel
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Marriott Corporation: The Cost of Capital (Abridged) General Approach The company is split into 3 divisions Lodging‚ Contract Services and Restaurants. The WACC for each of the 3 divisions and then subsequently the entire corporation’s WACC need to be calculated. This will be done through calculating the WACC for each of the 3 divisions and then taking a weighted average of these 3 divisional WACC numbers to get the overall Marriott Corporation WACC. 1. Calculating the Beta a
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Marriott corporation Group -1 Akasha.J Dhivya Priya.R Gayathri.P.A Sadhana.S Srikumaran.M.A Components of Marriott’s Financial Strategy Growth Objective: Is to become the preferred employer and provider in lodging‚ contract services and restaurants‚ and to be the most profitable company in the industry. 1. Manage rather than own hotel assets: Lowers accounting assets on the books thereby increasing the ROA. Sharing of risk that comes from the properties and provide Marriott to operate with
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Marriott Corporation (A) Introduction In 1927 J.W. Marriott Sr. founded the Marriott Corporation (MC) and during the 1980s experienced a huge growth. Marriott’s main strategy in those days was developing hotel properties around the world and selling these properties to outside investors while retaining lucrative long-term management contracts. MC was a conservative company and it stressed the themes of careful attention on the details‚ the organization and its employees. Quality was the one of the
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Marriott Corporation: The Cost of Capital Simrith Sidhu‚ Amy-Jane Miocevich‚ Jacques Rousset‚ Jing Tao Task One: Marriott uses the Weighted Average Cost of Capital (WACC) to measure the opportunity cost for investments. WACC is calculated using the 1987 financial data provided in the Marriot Corporation: The Cost of Capital (Abridged) case study and estimators. WACC = Cost of Equity x (Equity/Debt +Equity) + Cost of Debt x (Debt/(Debt + Equity)) x (1 – Tax Rate) This method is applied for
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Financial Decision Making Final Project Case analysis: Marriott Corporation Introduction and background The Marriott Corporation‚ an American firm‚ was founded in 1927 by J.Willard Marriot.The company began as a small beer stand and soon began to sell food and provided lodging that expanded rapidly. With the help of his wife Alice‚ the family owned business had 45 restaurants in nine states by 1940 and grew into one of the leading service companies. The Company has three major lines
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