Marriot Case Brief 1. What is the weighted Average Cost of Capital for Marriot Corporation? WACC for Marriott Corp is 11.89 WACC of divisions: Lodging 10.29‚ Restaurant 13.49‚ Contract Services 13.615 a) What risk-free rate and the risk premium did you use to calculate the cost of equity? We used 8.95% as the risk free rate (LT Government Debt) and the MRP we used was 7.43%‚ which means are expected market return is 8.95+7.43=16.38% b) How did you measure Marriott’s cost of debt? We added
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stock to a deposit box; hence‚ it also doesn’t make sense to compare stocks with very short-term Treasury Bills. For the beta of Papa John’s equity (PZZA)‚ we regressed the monthly return on PZZA with the monthly return on the S&P 500 index. Through doing so‚ we determined that PZZA had a market beta of 0.53. (Please refer to the attached spreadsheet for calculations of beta.) We also used the Ibbotson estimate for market premiums based on data from 1926-2009. Specifically‚ we decided that over
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I. Introduction. a. Objective(s). It is out of doubt that no matter how diversified the portfolio is‚ systematic risk can never be eliminated. The risk associated with individual stocks can be reduced‚ but general market risks affect almost every stock. So it is important to diversify between different asset classes and industries as well. The key is to find a medium between risk and return. The objective of this paper is to discuss importance of diversification of investment portfolio within
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short-term US T-bills between 1926-1987. This market premium is consistent with the current academic suggestions and it was used in all calculations of this exercise. The leveraged Beta (Bl) of the lodging division‚ needed for CAPM‚ was derived from the following equation: Bl=Bu(1+D/E)‚ where Bu is the unleveraged Beta. Bu was in turn derived from the weighted-average of the Bu’s of the lodging businesses given in the case. The weighted-average method rather than a simple arithmetic-average method
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BUS650:Week 3 Assignment 1 Jocquetta D. Harris BUS 650: managerial Finance (NAJ1240A) Martin Cain October 22‚ 2012 Complete Chapter 12 Closing Case at the end of the chapter and submit answers to your instructor. 1. Most publicly traded corporations are required to submit 10Q (quarterly) and 10K (annual) reports to the SEC detailing their financial operations over the
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expected returns‚ yet the investment on MORELY appears the cost‚ which has only 5.70% expected returns. c. Rate of return is mainly connected with the beta coefficient‚ which means if the rate of return is relatively higher‚ then the company will have higher risk. Judging from table1 in the attachment‚ CPC with higher rate of return(9.70%) has higher beta coefficient(1.53%)‚ which means it might be the most profitable one‚ but the risk is high‚ while MORELY has the lowest rate of return(5.70%)with the
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What are the different ways‚ physiological and pharmacological‚ in which blood vessel diameter can be modified? Detection of changes in blood pressure (leading to resultant changes in blood vessel diameter): Baroreceptors at the carotid sinus (the bifurcation of internal and external carotid arteries in the neck) and the aortic arch detect changes in blood pressure. These non-encapsulated nerve endings‚ located in the adventitial layer of arteries‚ are technically mechanoreceptors; they respond
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P = price V = variable cost Fc = fixed cost t = time in yrs Chapter 11 quiz Q ‚ P ‚ V ‚ FC (based-plan‚ lower‚ upper) DEP = F0Costs / # yr’s Based price for (Q ‚ P ‚ V ‚ FC) multiply them each by WITHIN 10%‚ .10 than add‚ subtract Best case +P‚ +Q‚ -V‚ -FC Worst case –P‚ -Q‚ +V‚ +FC Best case scenario: OFC = [(Q+ x P+) – (Q+ x V-) – FC- – DEP] (1 - TAX RATE) +DEP high rev‚ low cost Worst case scenario: OCF= [(Q- x P-) – (Q- x V+) – FC+ – DEP] (1 - TAX RATE) +DEP high cost‚ low rev
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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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Our results are robust to specifications that account for potential endogeneity related to a firm’s derivatives use and capital structure decisions. We further find that the reduction in the cost of equity is attributable to both lower market beta and SMB beta‚ suggesting that firms use derivatives to reduce their financial distress risk and that this distress risk has a systematic component that is priced in the market. Finally‚ the observed reductions in the cost of equity tend to be largest for
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