Capital (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
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| Marriott Corporation | Case Study – Write Up | Hitesh Gupta & Swapnil Deshpande 2-5-2015 | Q1 what is overall WACC for Marriott Corporation? Ans :- For calculating WACC we need cost of equity for the firm(ke) ,cost of debt(kd) capital structure of the firm and tax rate (t). To calculate cost of debt we chose the long term interest rate on U.S. government bond and added debt rate premium (From Table A debt premium = 1.3%) for Marriott Corporation to it. We chose long term US
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Case Study: Marriott Corporation The Cost of Capital Teresa Cortez Keith Gemmell Brandon Papsidero Robin Reschke October 28, 2013 Table of Contents 1. Are the four components of Marriott’s financial strategy consistent with its growth objective? ..................................
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| Case Study Marriott Corporation | | | | | | 08. April 2014 Table of Contents 1 Are the four components of Marriot`s financial strategy consistent with its growth objective? 1 2 How does Marriott use its estimate of its cost of capital? Does it make sense? 3 3 What is the WACC for Marriott Corporation? 3 3.1 Risk free rate? Market risk premium? 3 3.2 Cost of debt? 4 4 What type of investments would you value using Marriott´s WACC? 6 5 If Marriott used a
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Marriott's corporation: the cost of capital What is the weighted average cost of capital for Marriott Corporation? Are the four components of Marriott's financial strategy consistent with its growth objective? Marriott Corporation is an international company who's the growth over the year has been more than satisfactory. In 1987, Marriott's sales grew up by 24% and its return on equity stood at 22%. Moreover the sales and earnings pr share has doubled over the previous year. The company
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manage hotel properties instead of owning them Marriott lowers their accounting assets on the books, therefore increasing their return on assets as compared to owning the properties outright. This strategy also effectively shares the risk that comes from the properties, and lets Marriott operate with more liquidity, offering them the opportunity to relocate their hotel or restaurant operations without the need to sell properties, for instance. Marriott can analyze potential projects and discount the
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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
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Marriott Case Study In this summary, we are going to discuss Marriott’s strategy points for maintaining its status as a premier growth company, weighted average cost of capital (WACC), divisional hurdle rates, and justification of numbers used in calculations. Marriott’s strategic plan to maintain its status as a premier growth company can be broken into four distinct areas: managing (as opposed to owning) hotel assets, choosing investments that increase shareholder value, optimizing the use
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Instructor Guide CORPORATE FINANCE COURSE NUMBER: MBA591 [pic] Jones International University®, Ltd. 1.800.811.JONES (5663) http://www.jonesinternational.edu ©2008 Jones International University®, Ltd. All rights reserved. 9697 East Mineral Avenue, Englewood, Colorado 80112, USA This workbook and all accompanying audio-visual material, manuals and software (collectively, the "Materials") are
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Jacque Final Review Guide 1) Operating Leverage vs. financial leverage: Laurence A high degree of Operating Leverage means that a relatively low change in sales will result in large change in EBIT. If all things are held constant, the higher the firm’s fixed cost the greater its Operating Leverage. In Jacque’s words, this has to do with volatility of the top line. Those firms are usually highly automated, capital intensive, hire highly skilled individuals (read pay them huge salaries), and
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