Introduction and background We are conducting an analysis of Marriott Corporation for calculating the hurdle rates at each of the firm ’s three 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
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International finance FIN 412 Exam #2 MC: Examples of "single-currency interest rate swap" and "cross-currency interest rate swap" are: A. fixed-for-floating rate interest rate swap‚ where one counterparty exchanges the interest payments of a floating- rate debt obligations for fixed-rate interest payments of the other counter party B. fixed-for-fixed rate debt service (currency swap)‚ where one counterparty exchanges the debt service obligations of a bond denominated in one currency for
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The analytical tasks are straightforward and intended to provide a springboard into discussion of the main tenets of modern finance. Thus‚ the case would be useful for: • setting themes at the beginning of a finance course‚ including risk-and-return‚ economic reality (not accounting reality)‚ the time value of money‚ and the benefits of alignment of agents and owners • linking valuation to the behavior of investors in the capital market • modeling good practice in management and
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monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time. Discount Rate - Also known as the hurdle rate or required rate of return‚ is the rate that a project must achieve in order to be accepted rather than rejected. Return on Investment – Expected income divided by the amount originally invested Payback Analysis – The number of years needed to recover the initial
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different times. Present value can be described as the current worth of a future sum of money or stream of cash flows given a specified rate of return. (http://www.getobjects.com) Future cash flows are discounted at the discount rate. The higher the discounted rate‚ the lower the present value of the future cash flows. Determining what the appropriate discount rate is‚ is important to correctly place value future cash flows. The Present Value of an Ordinary Annuity is the value of a stream of promised
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1. Barker Corp. has a beta of 1.10‚ the real risk-free rate is 2.00%‚ investors expect a 3.00% future inflation rate‚ and the market risk premium is 4.70%. What is Barker’s required rate of return? Answer D | | | |2010 |21.00% | |2009 |-12.50% | |2008
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3.1.11 The Classical Theory of the Interest Rate In the Classical theory‚ using the Cambridge approach‚ the interest rate (the price of money) measures the cost of holding cash. At a given level of k‚ individuals therefore have what is called ‘loanable funds’ (hence Keynes’ called the Classical Model of interest the ‘Loanable Funds Theory’. Beyond their need for money for transactional purposes‚ cash can serve as a store of value but yields no return so individuals will tend to hold their excess
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4 1. You’ve observed the following returns on INTC Corporation’s stock over the past five years: -25%‚ -36%‚ 9%‚ 11%‚ and 17%. a. What was the arithmetic average return on the stock over this five-year period? b. What was the variance of returns over this period? c. What was the standard deviation of returns over this period? d. Suppose the current T-bill rate is 0.15%. What is the risk premium of owing INTC Corporation’s stock? e. What range of returns would you expect to see 95% of the time
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draft of the investment setup: With the information collected in the first step‚ to set reasonable assumptions‚ including rents‚ vacancy‚ renovation cost‚ operating expenses‚ etc and calculate the future cash flow‚ potential profits and expected return. To use scenario analysis‚ if necessary‚ and change the assumptions under different market situations to get a whole picture of future possibilities. Planning for own equity base and making an investigation for the mortgage market: To make
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competitive advantage in creating architectural models and will generate an additional $1‚000‚000 in annual pre-tax revenues. The system costs $8‚500‚000 and qualifies for a 45% CCA rate. Pre-tax maintenance costs on the printer amount to $15‚000 per year. The printer will have a salvage value of $750‚000 in 4 years. 3Dee’s tax rate is 35%‚ and the firm can borrow at 14%. PLease Corp. has offered to lease the 3D printer system to 3Dee for payments of $2‚500‚000 per year‚ and these payments also cover
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