(9-298-101). The case takes a detailed look at Marriott’s financial strategy and performance in efforts to determine the appropriate capital structure for the company. The analysis will further provide methodology for calculating Marriott Corporation’s weighted average cost of capital (WACC)‚ as well as an assessment of Marriott’s investments that continuously aide the corporation in achieving a competitive advantage over their top industry competitors. Marriott Corporation: Company Background In 1927‚ newly
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calculating its weighted average cost of capital are shown in the following table. Source of Capital Weight Long-term debt 40% Preferred Stock 20 Common Stock 40 Total 100% a. Determine the breaking points and ranges of total new financing associated with each source of capital. b. Using the data developed in a‚ determine the breaking points (levels of total new financing) at which the firm’s weighted average cost of capital will change. c. Calculate the weighted average
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Marriot Case Marriot use the Weighted Average Cost of Capital to estimate the cost of capital for the corporation as a whole and for each division‚ and the hurdle rate is updated annually.(WACC = (1-Tc) * (D/A) * R[D] + (E/A) * R[E]) Marriot’s Tax Bracket = 175.9/398.9 = 44% 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)
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Weighted Average Cost of Capital: Home Depot‚ Inc. Second Project FIN515 – Managerial Finance Instructor: Prof. David Eichenholtz Group: John Okogeri Fiona Harrison-Butts Haider Chaudhry Mia O’Blenis Christopher Cardenas Date: April 5‚ 2015 TABLE OF CONTENTS Introduction 3 company profile 3 WACC calculation 4 explanation of calculation/results 5 Limiting factors 5 Conclusion 6 references 7 Weighted Cost of Capital: Home Depot‚ Inc. Introduction The purpose of this project
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optimize its capital structure‚ and repurchase undervalued shares. Janet Mortensen‚ the senior vice president of project finance for Midland Energy Resources‚ has been involved in estimating the cost of capital of the company. She calculated the weighted average cost of capital (WACC) for the company as a whole‚ as well as each of its three divisions. The estimates are used for asset appraisals for capital budgeting and financial accounting‚ performance assessments; merger and acquisition proposals and
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this make sense? c. What is the weighted average cost of capital for Marriott Corporation? • What risk-free rate and risk premium did you use to calculate the cost of equity? • How did you measure Marriott’s cost of debt? 1. Are the four components of Marriott ’s 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
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WEIGHTED AVERAGE COST OF CAPITAL FOR DELL COMPUTER 1) From the SEC website‚ the balance sheet of Dell Computer reveals a Book value of debt = $3‚394‚000‚000 and Book value of equity = $4‚625‚000‚000 The same balance shows the breakdown of the long-term debt (book values) in table 1. Table 1 Coupon Rate (%) Maturity Book Value (Face Value in million $) 3.38 06/15/2012 400 4.70 04/15/2013 599 5.63 04/15/2014 500 5.65 04/15/2018 499 5.88 06/15/2019 600 7.10 04/15/2028 396 6
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return (IRR) Initial investment C 25% 700‚000 D 23% 400‚000 B 22% 200‚000 F 19% 600‚000 E 17% 500‚000 A 15% $400‚000 G 14% 500‚000 To estimate the firm`s weighted average cost of capital (WACC)‚ Kaka contacted a leading investment banking firm‚ which provided the financing cost data shown in the following table. Financing Cost Data Ace Products Company Long-term
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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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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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