Marriott Corporation Abstract Marriott Corporation has three divisions – lodging‚ contract services and restaurants – with dissimilar operations. The company uses three separate hurdle rates for the three divisions to value the proposed projects. It is believed that this strategy is more appropriate that using a single firm-wide discount rate because the operations of the three divisions differ drastically. However‚ the company has to ensure that the company uses an appropriate discount rate for
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Issue In this assignment‚ we are asked to compute the WACC of Marriott Corporation and each of the company’s three divisions. Our approach is outlined in the next section. We made a series of assumptions regarding either the available data or the missing information. This has been explained below‚ in a separate section. Approach We applied the following formulae to calculate the WACC: Our assumptions are explained in the next section. The table below presents the approach for calculations
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Marriott cost of capital Objective: 1) Calculate the divisional and the company cost of capital and explain the calculation. 2) Evaluate Marriott’s use of company cost-of-capital rate for the individual divisions. Cost of Capital for Lodging Division can be expressed as CC = We*Ce + Wd*Cd. For the weights of debt and equity (We and Wd)‚ the 1988 target-schedule rates of debt-to-assets and debt-to-equity were used as the only measures available in the case. Cost
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Marriott International Research Paper Damon Huber ENTP 420; Corporate Entrepreneurship Section 1 Richard S. Normington November 19‚ 2013 Marriott International Research Paper Marriott International is one of the most well-known and respected hotel chains in the world. They have maintained an incredibly high reputation in the industry for decades while also being the most profitable. They are currently ranked #217 on Fortune 500 with 12.317 billion
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October 23‚ 2010 SUBJECT: Marriott Company The purpose of this report is to give a general overview of Marriott International Inc. as the place which offers great career opportunities and benefits. Marriott International Inc. is one of the most respectable corporations in the United States. In considering potential companies to work for‚ Marriott is a top choice for many reasons. My research involved all aspects‚ thus making the report objective and informational. Marriott provides the highest quality
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se | 2010 | | BUSI 640 Leigh Healey Alex Lutz November 30th | [Marriott Case Study] | Professor Triantis | 1. What is the weighted average cost of capital (WACC) for Marriott Corporation based on its target debt-equity ratio? Use a 34% tax rate. WACC = [(E/D+E) * Re] + [(D/D+E) * Rd(1-Tc)] Be = [1 + (1-Tc) d/e]*Ba 1.11 = [1+(1-.34}.41/.59]*Ba Ba = .76098 Using statistics from page four of the assigned case study: Risk Free rate (Rf) = 8.72 % (10yr rate)
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1) Executive Summary Marriott needs to calculate hurdle rates which will be used in its investment project selection. The company chooses to use cost of capital as its hurdle rate. Since the company has three business divisions and the cost of capital in each division varies and differs from that of Marriott as a whole‚ each division needs to have its own hurdle rate. The reason behind this practice is the company’s strategy which focuses on growth. Using a single hurdle rate for the whole company
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Marriott Corporation Case Study 1) The Marriott Corporation implemented for key elements into their financial strategy: manage rather than own hotel assets invest in projects that increase shareholder value‚ optimize the use of debt in the capital structure‚ and repurchase undervalued shares 2) Marriott uses WACC to measure the opportunity costs of capital of investments with similar risks. Each division of Marriott has a different cost of capital‚ based on debt capacity‚ debt cost‚ and equity
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systems that were similar in nature. Additionally‚ competitors such Starwood hotels began developing member loyalty programs that resulted in far higher guest engagement‚ (5% of guests amassed to roughly 20% of the company’s revenue). Nonetheless‚ Marriott is very intuitive when it comes to business intelligence‚ but its competitive advantage with analytics is quickly eroding and it needs to start focusing on other aspects of the business to remain the industry leader. 2. Describe your company’s position
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13% of sales in 1987 respectively. Marriott is determined to develop and to enhance its position in each division and remain a premier growth company as stated in the annual report (1987). This key objective implies to become the most profitable company‚ be the preferred provider as well as preferred employer. Analysis the four key elements of Marriott’s financial strategy we arrive at the following conclusion: a) Managing rather than owning hotels assets‚ Marriott can become more focused on its core
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