Corporation: The Cost of Capital Executive Summary J. Willard Marriott started Marriott Corporation in 1927 with a root beer stand‚ expanding it into a leading lodging and food service company with sales of over $6 billion by 1987. At the time‚ Marriott had three main lines of business‚ lodging‚ contract services and restaurants‚ with lodging generating about 51% of company’s profits. The four key elements of Marriott’s financial strategy were managing hotel assets rather than owning‚ investing in
Premium Weighted average cost of capital Marriott International
financial strategy consistent with its growth objective? 2. How does Marriott use its estimate of the cost of capital? Does this make sense? 3. Using the CAPM‚ estimate the weighted average cost of capital for a. Marriott Corporation b. The lodging division c. The restaurant division 4. Towards answering #3 a. What risk-free rate and risk premium did you use to calculate the cost of equity? Why did you choose these numbers? b. How did you estimate the required rate of return on the debt
Premium Weighted average cost of capital Interest
Division’s asset weight to the corporation: Lodging = 2777.4/4582.7 = 0.59 Contract = 1237.7/4582.7 = 0.28 Restaurant = 567.6/4582.7 = 0.13 Risk free rate is 30 years T-Bond = 8.95% (Lodging use long-term debt) Market Premium is the Spread between S&P 500 and long-term US bond = 7.43% Debt rate premium above government = 1.10% Lodging’s D/A = 0.74 & Lodging’s E/A = 0.26 We use Ramada Inns‚ Inc. as the comparable to find β for Marriot’s lodging division. (E/A = 0.35‚ βE = 1.36‚ and assuming
Premium Weighted average cost of capital Economics Finance
divisions. Cost of Capital for Lodging Division can be expressed as CC = We*Ce + Wd*Cd. For the weights of debt and equity (We and Wd)‚ the 1988 target-schedule rates of debt-to-assets and debt-to-equity were used as the only measures available in the case. Cost of Equity (Ce) was calculated based on the CAPM formula. 30-year T-bond was used as a long-term risk-free security to get the risk-free rate‚ since Marriott used the cost of long-term debt for its lodging cost-of-capital calculations
Premium Mathematics Capital Weighted average cost of capital
HOSPITALITY MARKETERS INTERNATIONAL‚ INC. Sample Market Study Report Outline This outline will highlight the key areas researched in our typical Market Studies and can be used as an outline for the information to be presented in our reports. At times‚ our reports may deviate from this outline and will be customized to include more topic areas or eliminate some‚ depending upon their relevance to the report. In a Phase l Community Overview Market Study Report‚ these areas are thoroughly researched
Premium Supply and demand Hotel Marketing
entities in groups currently lodging special purpose financial statements. After receiving a higher number of responses from interested parties than usual‚ the AASB delayed their decision on the fate of special purpose financial statements (now known as Stage two of the differential reporting project) until more empirical research had been conducted. Research results At the time of writing‚ a significant amount of research has been undertaken on the numbers of entities lodging special purpose financial
Premium Finance Generally Accepted Accounting Principles Economics
its elegant and comfortable hotels and resorts. The company caters to a targeted customer base‚ ranging from the frequent corporate business traveler to the family enjoying their occasional weekend get-away. Marriott has continued its rise in the lodging‚ contract services‚ and restaurant industries. The company continuously strives to meet the needs and wants of its customers while strategically maneuvering the rigors of today’s competitive and ever-evolving market of glamorous destinations and convenient
Premium Weighted average cost of capital Internal rate of return Net present value
The Doubletree by Hilton London - West End lodging is in a perfect world situated in London’s memorable Bloomsbury area‚ in the middle of Holborn and Russell Square underground stations. Doubletree by Hilton inn has conventional‚ memorable character‚ while as yet keeping up the majority of the cutting edge comforts of this day. The bar92 eatery gives visitors evening tea‚ night beverages‚ and full individually meals. The wellness focus is open for visitors who need to assuage stretch in the wake
Premium Bloomsbury British Museum Holborn
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 was 22% and profits were $223 million. Lodging consisted of 51% of Marriott’s profits‚ while contracts
Premium Weighted average cost of capital
leading food service companies in the United States. As of 1987‚ Marriott recorded a profit of $233 million on sales of $6.5 billion and retained a high sales growth rate of 24%. Marriott runs on three major lines of business lodging‚ contract services‚ and restaurants. Lodging division which includes 361 hotels generated 41% of 1987 sales and 51% profits. Contract services division which provides food and services management generated 46% of 1987 sales and 33% of profits. Lastly‚ the restaurant division
Premium Weighted average cost of capital Debt Net present value