marriot
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 NPV and a irr higher then the set hurdle rate - relative to market interest rates, project risk, and estimates . then this is consistent with its strategy of growth
Optimize the use of debt in the capital structure. by focusing on its ability to service its debt. The lower they can bring their debt percentage their value will increase and is consistent with its strategy of growth
Repurchase undervalued shares
Buys backs will result in a higher PE ratio and investors currently holding stocks will see increase in their share value. Thou these are great signs by a company it could be just a different way to pay dividends. The greater loss is the opportunity to reinvest in other positive npv projects.
Just to keep share holders happy may not be the best strategy for growth
2) How does Marriott use its estimate of its cost of capital? Does this make sense? Marriott uses a Debt capacity and the cost of Debt: with a risk free rate, the floating and the fixed debt, its separates the divisions, uses A-rated debt for the spread, and debt / equity. all of which are acceptable.
Marriott uses the Cost of Equity: with CAPM and a constant beta. The Capm is acceptable, but the constant beta isn’t the best option. there should be different betas for different division risks.
3) What is the Weighted Average Cost of Capital for Marriott Corporation?
WACC= (1-t) x rD x D/V + rE x E/v t= tax rate (1-t) t=0.56 rD= cost of debt rD=
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 NPV and a irr higher then the set hurdle rate - relative to market interest rates, project risk, and estimates . then this is consistent with its strategy of growth
Optimize the use of debt in the capital structure. by focusing on its ability to service its debt. The lower they can bring their debt percentage their value will increase and is consistent with its strategy of growth
Repurchase undervalued shares
Buys backs will result in a higher PE ratio and investors currently holding stocks will see increase in their share value. Thou these are great signs by a company it could be just a different way to pay dividends. The greater loss is the opportunity to reinvest in other positive npv projects.
Just to keep share holders happy may not be the best strategy for growth
2) How does Marriott use its estimate of its cost of capital? Does this make sense? Marriott uses a Debt capacity and the cost of Debt: with a risk free rate, the floating and the fixed debt, its separates the divisions, uses A-rated debt for the spread, and debt / equity. all of which are acceptable.
Marriott uses the Cost of Equity: with CAPM and a constant beta. The Capm is acceptable, but the constant beta isn’t the best option. there should be different betas for different division risks.
3) What is the Weighted Average Cost of Capital for Marriott Corporation?
WACC= (1-t) x rD x D/V + rE x E/v t= tax rate (1-t) t=0.56 rD= cost of debt rD=