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 Corporation: Questions for HBS case “Marriott Corporation: The cost of capital” 1) Are the four components of Marriott’s financial strategy consistent with its growth objective? In my opinion‚ the four components of Marriott’s financial strategy are consistent with its growth objective. As we find in the case‚ the four components of Marriott’s financial strategy: Manage rather than own hotel assets‚ Invest in projects that increase shareholder value‚ Optimize the use of debt
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| Marriott Case | Cost of Capital | | Facts: Dan Cohrs is preparing the annual hurdle rates for the three divisions of Marriot Corporation (Lodging‚ Contracts‚ and Restaurants) which will have a significant impact on the firm’s financial and operating strategies. Marriott’s has been truthful to its operating strategy to remain a premier growth company‚ Marriott’s sales and earnings per share have doubled over the last four years. In 1987 Marriot’s sales rose 24%‚ the return on equity
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Executive Summary We found the weighted average cost of capital for Marriott as a whole to be 9.68%. The divisions of Lodging‚ Contract Services and Restaurants had WACCs of 8.14%‚ 13.33%‚ and 9.63% respectively. The only variable between these divisions that remains consistent is the tax rate. Marriott has a target rate for each of the divisions’ capital structures‚ which affects their debt and equity betas. Also‚ there are stark differences between the betas in the segments‚ as well as the
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QUESTION 1 Are the four components of Marriott´s financial strategy consistent with its growth objective? With regards to the overall strategy of primarily being a premier growth company‚ we analyze the 4 components as follows: 1. Manage rather than own hotel assets • Marriott developed the projects‚ established long term management contracts consisting of 3% of revenues and 20% of the profits. The assets were then sold to partners. Not owning hotels provided Marriot with greater liquidity
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Thoma Bravo – Citect Corporation (HBS 9-209-022) Study Questions 1. Do you think TB or Schneider would create more value as the owner of Citect? 2. TB would assume what risks if they are the winning bidder? 3. Should TB continue to bid on Citect and at what price? Are the expected ROIs and IRRs to TB sufficient at your revised bid amount? (* note: a detailed evaluation model will be constructed during the class session *) Study Questions 1. Is Newell just another conglomerate? How
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Case: Land Securities Group (A): Choosing Cost or Fair Value on Adoption of IFRS Case Number: 9-105-014 Topic: Financial Reporting and Control Description: A U.K. real estate firm‚ required to adopt international accounting standards (IAS) by 2005‚ must change the reporting of its primary asset (investment property) from the revaluation model under U.K. GAAP to either the cost or fair-value model under IAS. This would have a number of effects on European investment property firms‚ including
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Marriott Bedding Program CASE STUDY Marriott Bedding Program Marriott International Uses Project Management to Upgrade Bedding Worldwide Headquartered in Washington‚ DC‚ Marriott International‚ Inc. is one of the leading hospitality companies in the world with more than 2‚400 properties in 68 countries and territories. As a management company‚ Marriott is responsible for daily operations in both company-operated and franchised properties. Marriott has an extensive portfolio of brands
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I. Problem Dan Cohrs‚ the vice president of project finance at Marriott Corporation‚ is preparing his annual recommendations for the hurdle rates for each of Marriott’s three divisions: lodging‚ contract services‚ and restaurants. However‚ this is a complicated process because finding beta‚ cost of debt‚ and cost of equity in order to find weighted average cost of capital‚ or WACC‚ must be calculated using proxy firms and divisional data. The firm’s use of WACC is directed towards
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