Question 6 What is the cost of capital for the lodging and restaurant divisions of Marriott? Answer: The cost of capital for lodging is 9.2% and the cost of capital for restaurants is 13.1% Calculation: WACC = (1-t) * rd * (D/V) + re* (E/V) Where: D= market value of DEBT re = aftertax cost of equity E = market value of EQUITY V = D+E rd = pretax cost of debt t = tax rate To calculate the formula above‚ we need to determine each component Tax rate (t) 56% --> calculated before LODGING
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The Cost of Capital Benedict Amanor‚ Yolanda Brown-McCutchen‚ Edith Compean‚ Angel Longino and Melissa Shea-Brooks FIN/571 May 18‚ 2015 William Stokes The Cost of Capital In our fifth week of understanding the practices of Corporate Finance‚ we reviewed the Cost of Capital video. This video provided information on Pfizer‚ a researched based pharmaceutical company that makes products to help face health care challenges. Our goal is to highlight the cost of capital as described by Amit
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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 the WACC
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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. Weighted Average Cost of Capital (WACC) is used to determine the average cost of financing a company. Companies are funded using both debt and equity and both require varying rates of return. WACC allows you to put a “weight” on the different types of financing and their differing rates to get a total cost of capital. Team 12 does not agree with Joanna Cohen’s WACC calculation because we feel she took some liberties in her numbers‚ the most notable being that of equity. Ms. Cohen used book
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Nike Inc. Case Number 2 Nike Incorporated’s cost of capital is a vital element when addressing opportunities regarding top-line growth and operating performance. Weighted Average Costs of Capital (WACC) is an essential estimation that is needed in order to determine the amount of interest that will be paid for each additional dollar financed. This translates to be the minimum overall required rate of return that the firm will keep. We disagree with Johanna Cohen’s assessment of Nike due to two
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COST OF CAPITAL of HERO HONDA (WACC) Component | Amount | Cost | Weight | Weighted Cost | No debt: the amount given in bl sheet is a deferred sales tax | | | | | Equity | 39.94 | 20.68206 | 0.011526629 | 0.238394441 | Retained earnings | 3425.08 | 20.68206 | 0.988473371 | 20.44366632 | | | | | | Total Capital employed | 41209.34 | | | 20.68206076 | THE GORDON GROWTH MODEL The Gordon growth model‚ developed by Gordon and Shapiro‚ assumes that dividends grow
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Chapter 9 Cost of Capital 1. What is the WACC? a. Weighted Average Cost of Capital- most firms employ different types of capital‚ and because of their differences in risk‚ the difference securities have different required rates of return. Typically=debt‚ preferred stock and common equity. 2. What precautions must we take when measuring the WACC to use for capital budgeting decisions (future investment)? b. The company’s current and recent past book and market value structures
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1. What is Capital One’s business and who are their competitors? Capital One is a financial services company‚ whose banking and non-banking subsidiaries market a variety of financial products and services. The Company operates in Credit Card‚ Commercial Banking and Consumer Banking segments. It issues credit cards‚ loans‚ banking and savings products‚ while determining rates to charge‚ and which customers are risky. Its competitors consist of banks‚ investment banks‚ and other credit card companies
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Pfizer Inc.’S Cost of Capital and Capital structure - Xiaoyue Shi The costs of capital and capital structures for Pfizer Inc. and its two competitors Merck & Co. Inc. and Johnson & Johnson in the pharmaceutical industry are analyzed in this memo. When calculating the cost of common stock for the three companies‚ three different approaches including Capital Asset Pricing Model (CAPM)‚ Discounted Cash Flow (DCF) and the bond yield plus risk premium are applied (Appendix A). For CAPM approach
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