Marriott 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‚
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Executive Summary The case‚ Marriott Corporation: The Cost of Capital (Abridged)‚ concentrates on making decisions based on capital asset pricing model (CAPM) and the weighted average cost of capital (WACC) to measure the opportunity cost for investments. Dan Cohrs‚ the Vice President of Finance of Marriott Corporation‚ had to deal with making recommendations for the hurdle rates at Marriott Corporation and its three divisions which are lodging‚ restaurant and contract services. In calculating
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Case 1- Marriott Corporation: The Cost of Capital Some preliminary questions: 1. What do you think about Marriott’s policy of repurchasing shares? Repurchase whenever stock price < warranted equity value Does this mean the market is inefficient? 2. Why does Marriott manage rather than own hotel assets? Finding limited partners on a hotel project is equivalent to selling private equity in the project Is there any reason to
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Marriott Case 1. What is the WACC for Marriott Corporation? Cost of Debt Tax Rate We determined this number by taking income taxes paid/EBITDA = 175.9/398.9 = 44.1% Return on debt There are two clear components of debt: fixed and floating. In order to get the fixed debt rate we took the interest rates on fixed-rate government securities and added the premium
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home improvement retailer. They are now the second largest retailer in the United States‚ offering 40‚000 to 50‚000 different types of home improvement supplies‚ building materials‚ and lawn and garden products. They carry a wide assortment of low-cost products‚ and offer expert advice and exceptional customer service. As an innovator of the home improvement industry‚ Home Depot has expanded into Canada‚ Mexico‚ Argentina‚ Chile‚ and Puerto Rico. Currently there are 1‚459 stores including fifty
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Midland’s cost of capital 1. I choose the rate of 30-year U.S. Treasury bonds in 2007 (4.98%) as the risk free rate in the 2007 WACC calculations. The reason is that majority of large firms and financial analysts report using long-term yields for bonds to determine the risk-free rate. Rf=0.0498 2. Cost of debt‚ which is determined by adding the spread to Treasury (1.62%) to the rate of 30-year treasury bonds in 2007. Rd=0.0498+0.0162=0.066 3. Cost of equity‚ the EMRP (5%) and D/E (59
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Natural Resources and Energy in the Rainforests The beauty‚ majesty‚ and timelessness of a primary rainforest is indescribable. It is impossible to capture on film‚ to describe in words‚ or to explain to those who have never had the awe-inspiring experience of standing in the heart of a primary rainforest. Rainforests have evolved over millions of years to turn into the incredibly complex environments they are today. Rainforests represent a store of living and breathing renewable natural resources
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1. What is the weighted average cost of capital for Marriot Corporation? Briefly outline the key assumptions that you made in computing the WACC. 2. What is the cost of capital for the lodging and restaurant divisions of Marriot Corporation? Briefly outline the key assumptions that you made in computing the cost of capital and outline any limitations that are presented by your analysis. 3. If Marriot uses a single company-wide cost of capital for evaluating investment opportunities in each of its
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Natural Resources and Energy Paper Spechelle Jones‚ Cherrie Chicaletto‚ Robert Hernandez‚ Jamie Hughes SCI/256 October 13th‚ 2010 The world is growing at a rate of speed of 2.8 people per second and losing 1.6 acres of land per second in accordance with an article last month titled Environmental Impacts from Unsustainable Population Growth on the World Population Awareness website. World Population Awareness is an organization concerned with recent problems of as well as solution ideas
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EM9105 Energy Resources Management This introductory course provides an overview of energy resources management in the context of sustainable economic development. Topics include energy and human society‚ energy resources and reserves‚ supply‚ distribution‚ utilization‚ recovery and conversion‚ environmental impacts of energy utilization‚ energy economics and policies. Course Objective To provide general understanding on the various sources of energy‚ their availability‚ quality and their impact
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