...Marriott Case Study 1)What is the weighted average cost of capital for Marriott? The weighted average cost of capital for Marriott is 11.64%. .4(cost of equity) + .6(cost of debt)(1- tax) Tax = Income tax/Income before tax = 175.9/398.9 = 44% Cost of debt = .5(.0895) + .4(.0872) + .25(.069) + .5(.011) + .4(.014) +.25(.018) = 11.25% B = 1.1 when d/e = .41 target d/e is .6 so.. B(a) = B(e) / (1 + (1-tax) D/E) = 1.11 / (1+.56(2499/3596)) = .80 B = .8 * (1+.56(5394/3596)) = 1.47 Equity risk Prem = 7.43% (arithmetic average between 1926-1987) Cost of Equity = Rf + B(Risk Prem) = .0872 + 1.47(.0743) = 19.64% WACC = .4(.1964) + .6(.1125)(1-.44) = 11.64% i)What risk free rate and risk premium did you use to estimate the cost of equity? We used the risk free rate of a 10 year government bond (8.72%) to estimate the total risk free rate. We found the risk premium by looking at the arithmetic average between 1926-1987 of the spread between S&P 500 Composite returns and long-term U.S. government bond returns. ii)How did you estimate Marriott’s cost of debt? We estimated the cost of debt by multiplying the fraction of debt at the floating rate for each division by the long term rate (for lodging) plus the premium or the shorter term rates (for the other 2 divisions) plus the premiums. We chose to use 30 year rate for lodging since that probably lasts the longest, 10 year rate for restaurants since they probably last more than a year, and the 1 year rate for...
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...Case 1 Marriot Corporation: The Cost of Capital The University of Hong Kong Group 5 January 29, 2016 GUO Weizuo, Aurora 3035235642 guoweizuo2014@163.com HE Fei, Vincent 3035236608 vincenthefei@gmail.com LI Yao, Steve 3035159109 liyao@connect.hku.hk LOU Chaoyue, Laura 3035236414 lauralou@hku.hk Catalog 1. Four components of Marriott’s financial strategies consistent with its growth objective ............... 1 2. The weighted average cost of capital for Marriott Corporation ...................................................... 2 (a) The risk free rate and risk premium to calculate the cost of equity. .......................................... 2 (b) Measurement of Marriott’s cost of debt .................................................................................... 2 (c) Preference and explanaton between arithmetic & geometric mean to measure rates of return . 2 3. Which type of investment you value using Marriott’s WACC. What would happen to Marriott over time if company used a single hurdle rate ........................................................................................... 3 4. The cost of capital for the lodging and restaurant divisions of Marriott ......................................... 4 a) The risk-free rate and risk premium to calculate the cost of equity for each division ................ 4 b) Measurement of the cost of debt for each division ...............................................................
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...(Abridged) Executive Summary: The case "Marriott Corporation: The Cost of Capital (Abridged)" focuses on an ideal opportunity to review the capital asset pricing model and the weighted average cost of capital through calculation of the cost of capital for Marriott as a whole. Dan Cohrs is faced with making recommendations for the hurdle rates at Marriott Corporation and its three divisions utilizing CAPM and WACC. This case illustrates how to calculate beta based on comparable companies and to lever betas to adjust for capital structure; the appropriate risk-less rate and market risk premium; the choice of time period to estimate expected returns and the difference between the geometric and the arithmetic average as a measure of expected returns. SYNOPSIS Marriott Corporation began in 1927, and over the next 60 years, the company grew into one of the leading lodging and food service companies in the US. In 1987, the Marriott's annual report stated, "We intend to remain a premier growth company. Our goal is to be the preferred employer and provider, and the most profitable company". Marriott's profits were $223 million on sales of $6.5 billion. In April 1988, vice president of project finance at the Marriott Corporation, Dan Cohrs, must prepare annual recommendations for the hurdle rates at each of the firm's three divisions, including restaurant, lodging, and contract services, as well as Marriott Corporation as a whole. The company's...
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...on systems has probably lead to Indian Hotels being chosen as a case study by Harvard Business School. It all began last September when IHL's senior V-P (human resources) Bernard Martyris took part in a 12-day HBS executive programme on HR management with 80 participants from 26 countries. While most of the participants shared notes on common issues, the cultural aspect of HRD often came up for discussion. Using the experience of his own company, Martyris talked about how IHL had moved from a work ethos, which was relationship-based (especially during the Kerkar days) to one which now depends on solid systems and is more task-oriented. According to Martyris, IHL has been selected as a case study because the evolution of systems in aspects like work ethos, leadership and cultural change can be traced from its relation-based roots to its current systemic form. The IHL case study will be introduced in the Strategic Management Course and will be a part of the core MBA programme and not just the multiple short-term courses which HBS offers. Professor of organisational behaviour at HBS Thomas J Delong said that though he rarely takes up a case study in HR with a participant, this time he saw the opportunities and processes to unite a case. Apart from being able to trace the evolution of systems, HBS was also impressed by the ability of the Taj Group of hotels to combat major international competitors like Marriott, Radisson, Four Seasons and Carlton that are already in India. ...
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...University MBAF 614: Financial Analysis & Strategy Fall 2015 Instructor: Dr. David Offenberg Office: Hilton 313 Phone: (310) 338-2903 E-mail: doffenberg@lmu.edu Office Hours: Tuesday, 4:00 – 6:00 p.m. (or by appointment) Class time: Tuesday, 7:15 - 10:00 p.m. (HIL 023) Course Overview: The purpose of this course is to study the impact of corporate financial strategy on shareholder wealth. In essence, this course covers the fundamentals of MBAA 608 with a lot more depth. Throughout the semester, we will examine real situations that were faced by real chief financial officers. In the end, you should have a much better appreciation for the role of the CFO in keeping the corporation afloat. Method: This course is taught via case studies supported by lectures. Class sessions begin with a studentled analysis of the assigned case. The remainder of the class period will be dedicated to further analysis of the case. Students have substantial responsibility (and incentives) for coming to class prepared to engage in active discussion. Each student is expected to work in a team to analyze the cases. Readings: The textbook for the course is: Case Problems in Finance, by Kester, Ruback and Tufano, Twelfth Edition, Publisher: McGraw Hill- Irwin. The bookstore will not carry the book so you must order it online. The MBAA 608 textbook is also a useful reference, but not required (Brigham and Ehrhardt, Financial Management: Theory and Practice). Alternatively, you may use ...
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...HEC Lausanne Corporate Finance Case 3: Marriott Corporation (A) Spring Semester 1. Project Chariot is proposed by MC’s CFO, Stephen Bollenbach, to face the troubles that Marriott Corporation (MC) is currently facing. A glimpse of history is useful to understand the current situation. MC’s main business is to develop hotel properties, to sell them to outside investors and to conclude long-term contracts. In the 70’s MC began to finance its expansion by major borrowings under the impulsion of the new president J.W Marriott, Jr. that abandoned the conservative financing policy of its predecessor (and father). In 1981 the Economy Recovery Tax Act (ERTA) gave enormous incentives for companies to invest (tax write-offs were given for each $ invested in real estate). This pushed MC to develop even more its activities for instance in lodging services or in full service compact hotel. Even though ERTA was ended in 1986 MC continued its massive investments, which lead to a significant accumulation of debt. This was not an issue since the revenue growth was able to sustain the also growing interest payments. Until the drop of income in 1989, which froze capital expenditures. Unfortunately for MC, it was followed by the real estate collapse in 1990 that left MC with massive interest payments for properties that no one wanted to buy anymore given the current economic environment. This situation results in an extremely limited ability for MC to raise funds in the capital market...
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...contemporary organizational issue you find intriguing. Use one field site or example for the entire paper. Also, be explicit about the level issue. For example, if you are using the concept of personality then it is an individual level issue. A list of concepts and their related levels is provided in a separate document. Focus of paper-related requirements: Outline: Submit a formal outline for your paper, complete with references. The purpose of the outline is to help you organize your content, which also results in increased clarity, improved logic, and better structure of the paper. There may be adjustments from this document to your final paper, but at this stage the paper should not require major revisions. Final Paper: Use a case study format for the structure of your paper. Identify and analyze issues using course concepts, and propose recommendations for the organization you are focusing on. Use of course concepts 1. Use a minimum of 8 concepts for the paper. Include a list of the concepts you used at the beginning of the paper. 2. Briefly define each concept you use within the text (a paragraph or two). 3. For each concept, write a diagnosis at one level (e.g., the person level). For example, you might write “The employee misses work frequently due to stress from conflict with her supervisor.” Note, stress and conflict would require definitions.) 4. For each concept, write a solution or solutions. Identify the level(s) you addressed in Step 2...
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...Calendar Overall for Case-Study Presentation & Mid-Term Exam – MGT 4760 (Strategic Management) Sem 1, 2012/2013 Sec 8 (M-W) No. | Week | Topics | Class Day | Date | Schedule | Details | | 1 | Chapter 1: The Nature of Strategic Management | 1- Mon 2- Wed | 10/912/9 | | | | 2 | Chapter 2: The Business Vision and Mission | 3- Mon 4- Wed | 17/919/9 | | | | 3 | Chapter 3: The External Assessment | 5- Mon 6- Wed | 24/926/9 | | | | 4 | Chapter 4: The Internal Assessment | 7- Mon 8- Wed | 1/103/10 | Quiz 1 (Chapter 1.2.3) | | | 5 | Chapter 4: The Internal Assessment | 9- Mon 10- Wed | 8/1010/10 | | | | 6 | Chapter 5: Strategies in Action | 11- Mon 12- Wed | 15/1017/10 | | | | | BREAK(22/10 – 28/10) | 13- Mon 14- Wed | 22/1024/10 | | | | 7 | Chapter 5: Strategies in Action | 15- Mon 16- Wed | 29/1031/10 | Case Presentation Session 1Case Presentation Session 2 | Group 1:L: Lia Hilaliah (Case Study 3)Group 2:L: Mas Syairah bte Mohamad (Case Study 5) | | 8 | Chapter 6: Strategy Analysis and Choice | 17- Mon 18- Wed | 5/117/11 | | (Mid-Term Exam 7/11 Wednesday)Seminar Room 1.1 | | 9 | Chapter 6: Strategy Analysis and Choice | 19- Mon 20- Wed | 12/1114/11 | Case Presentation Session 3Case Presentation Session 4 | Group 3:L: Mohamed Sheikh (Case Study 9) Group 4:L: Izzati Nor binti Salleh (Case Study 14) | | 10 | Chapter 7: Implementing Strategies: Management and Operations...
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...ARCTIC MINING CONSULTANTS Case Synopsis Arctic Mining Consultants is a mining company that deals with mineral exploration. In this case study, the project given is staking 15 claims in Eagle Lake, Alaska. The project Manager was Tom Parker, who has a wide experience and specialized knowledge in all nontechnical aspects of mineral exploration. He is a geological field technician and field coordinator for Arctic Mining Consultants. He assigned his previous field assistants John Talbot, Greg Boyce and Brian Millar to help him complete the project. The job required them to stake at least 7 lengths each day in order to be completed on time. However, the whole team has became very tense and agitated, especially Tom Parker, as the deadline was just around the corner and there’s still many to be finished within the limited time. The problem became worse with the way Tom managed and treated his team. The only motivation to the team was the $300 bonuses promised by the company when the job is done on time, otherwise, they might wished to give up already. This happened because working as a field assistant and in long-working hours only giving them low wages, which is considered unreasonable compared to what they have to do. During the eight hard days, everything had actually proved the strengths and weaknesses of each of the team members, including Tom. Case analysis symptoms 1) What symptom(s) exist in this case to suggest that something has gone wrong? The symptom(s) to suggest...
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...Running head: CASE STUDY XYZ Case Study XYZ: An Examination of Project Procurement Management Practices Group 12 John Doe Jane Smith Bobbie Sue University of Maryland University College Project Procurement Management, Semester XXXX, Section XXXX Professor Stephen R. Guth MMMM DD, YYYY [No Abstract or Introduction required for this assignment] The Inception Phase Rating Scale: 5—Excellent, 4—Very Good, 3—Good, 2—Poor, 1—Very Poor |Project Management Area |Inception Phase | |Scope Management | | |Time Management | | |Cost Management | | |Quality Management | | |Human Resource Management | | |Communication Management | | |Risk Management | | |Procurement Management | ...
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...policy. 2) Employee conditions: a. Lack of motivation b. Compensate for low wages by over indulgence of free food allowance c. High turnover rate due to availability of high application rates. d. Employees are mostly college and high school students e. Lack of respect for managers. f. No incentive to increase motivation. In the case study Perfect Pizzeria, the area supervisor has many problems that need his attention. The largest appears to be the organization. In this case study I will assume that the area supervisor has the authority to affect change within his organization (i.e. he is the franchise owner). Being in an area with few job opportunities should give him the perfect opportunity to recruit bright, ambitious, and motivated people to staff his pizzerias. How can the area supervisor change his organization to achieve a more fluid corporate culture? I think this change can be achieved by human resource changes, structure changes, motivational changes, and reward for good performance as well as accountability for poor performance. Each one of these areas will require a change from the corporate level. For the sake of my case study I am going to assume that the area supervisor (franchise owner) can lobby to achieve this change within the organization. The first area to look...
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...letters in industry or for a class, knowing your purpose and audience will help determine what information to include. Generally, business letters follow a particular format, although your instructor or company may require you to use alternative formats. This guide provides writers with an introduction to writing business letters. Case Studies: This guide examines case studies, a form of qualitative descriptive research that is used to look at individuals, a small group of participants, or a group as a whole. Researchers collect data about participants using participant and direct observations, interviews, protocols, tests, examinations of records, and collections of writing samples. Starting with a definition of the case study, the guide moves to a brief history of this research method. Using several well documented case studies, the guide then looks at applications and methods including data collection and analysis. A discussion of ways to handle validity, reliability, and generalizability follows, with special attention to case studies as they are applied to composition studies. Finally, this guide examines the strengths and weaknesses of case studies. Desktop Publishing: Desktop publishing is the process of laying out and designing pages with your desktop computer. With software programs such as PageMaker and Quark Xpress, you can assemble anything from a one-page document to a...
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...Brussels and Bradshaw In response to the case study, Brussels and Bradshaw is a well-established financial institution that offers their clients competitive and innovative solutions for their community and work environments. The banking institution offers a summer internship to bright and driven individuals. The internship includes 14 weeks of very intense training and long hours. Interns are paid $20,000 for the contract. During the screening process, out of all the possible candidates Audrey Locke was selected. Audrey has some experience as an assistant, assurance analyst and financial planning analyst. Brussels and Bradshaw is operating in more than 25 countries globally; this case study takes place in Toronto. Many behavioral issues in the Brussels and Bradshaw institution are unprofessional and stressful. Job stress is defined as feeling one’s capabilities, resources, or needs that do not match the demands or requirements of the job (Hitt, Miller, & Colella, 2011 p. 249). Working 70 and 80 hours per week or possibly 120 hours will put a major burden on anyone, especially someone new to the working environment. Audrey is excited with her internship and very eager to learn. She is assigned a mentor and buddy by the business development manager, Kelly Richards. Kelly has 10 years of experience. Although associates consider her human resources, Kelly’s job is strictly administrative. Audrey is never introduced to her mentor and her buddy, Christine Page is very...
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...Business case studies determine and define the primary issues that a company faces in the modern world market. A well designed business case study can provide a detailed contextual analysis of limited conditions and their horizontal relationships to other entities. In the case of Coach, they are an international clothing accessory company with a reputation of making pristinely handcrafted items with unique designs and a label that represents over seventy years of craftsmanship. In order to fully understand Coach’s business model, empirical data must be collected and analyzed to include the historical and current financial statistics, an in-depth analysis of the company overall, an analysis of the company’s business model, and finally current issues and future forecast that affect the longevity of the enterprise. By studying the history of Coach, both investors and those with an interest in the company can gain insight into key factors that motivate company decisions. Background/History The history of Coach starts in 1941 in a small family run leather workshop with six primary artisans in Manhattan that had skills passed down from generation to generation. It was not long until leather good become sought after for their high quality and workmanship. Through the guidance of the longtime and current CEO, Lew Frankfort, Coach expanded their business from just 6 million dollars 30 years ago to current sales exceeding 3.6 billion dollars. (Coach, 2012) From 1941 to present, the...
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...Case Studies and Exercises Lecture 2. The Rise of Multinational Companies Case: MUELLER: China Bound? (A), (B) and (C). (308-358-1, 308-359-1 and 308-360-1). Discussion Questions: 1. What are the primary ownership advantages of Mueller? 2. What are the major ways in which Mueller could serve the China market? 3. What are their primary advantages and disadvantages?? 4. If Mueller decided to invest in China, what would be the main functions of its subsidiary? 5. How could the risks involved in the FDI to China be managed? Lecture 3. The Myth of the Global Company Case: Lafarge: From a French Cement Company to a Global Leader (304-019-1) Discussion Questions: 1. What are the main characteristics of Lafarge’s internationalisation strategy and competitive competences and how do these differ from those of other cement companies such as Cemex and Holcim? 2. What were the assumptions underlying Lafarge's strategy and how justified were these? 3. To what extent is Lafarge a French company with foreign operations, as distinct from a global MNC, and how is it likely to develop as a MNC? 4. What are the implications of Lafarge’s growth for the internationalisation of other French firms? Lecture 4. Competing Capitalisms in the 21st Century Case: Messier's Reign at Vivendi Universal (9-405-063) Discussion Questions: 1. What was Messier's strategy in transforming CGE into Vivendi, what assumptions was it based on and how justified were these? 2. What does this transformation reveal about the...
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