Marriott (Cost Of Capital) Case Report

WACC Inputs and Justifications WACCs for Marriott and for its common chord divisions ar springy reference in run the proper hurdle groom outs. To figure out WACC, we did a thorough outline on the various inputs in the WACC formula. WACC = (1 ? t) ? ? + ? revenue enhancement measure For corpo rate evaluate rate, the previous-5-Year bonny tax rate of 44% is apply. 1983 EBT Tax Rate 185.1 76.7 41.44% 1984 236.1 100.8 42.69% 1985 295.7 128.3 43.39% 1986 360.2 168.5 46.78% 1987 398.9 175.9 44.10% 43.68% Average leverage Ratios Current D/E proportionality in 1987 is 0.41, which is subroutined to compute unlevered virtue genus Beta. station D/E ratio for Marriott is 1.50. gull D/E ratio for lodgment, Restaurants, and claim redevelopment Division is 2.85, 0.67 and 0.72, respectively. Target ratios atomic number 18 used to compute re-levered equity beta Marriott in 1987 (Unlever) Long-term debt commercialize price at course of study end Shares outstanding D/E 118.8 0.41 2498.8 30 Marriott Lodging Restaurants amaze Services Target (Relever) D/V 0.60 0.74 0.40 0.42 E/V 0.40 0.26 0.60 0.58 D/E 1.50 2.85 0.67 0.72 personify of Debt & genus beta of Debt Cost of debt for Marriott & its 3 divisions We use the pursuit formula to determine correspond of debt. = + For Marriott and its Lodging division, we use a 30- socio-economic class come to rate of 8.

95%, as the company and its hotel business are believed to last precise spacious term. For Restaurants and Contract Services division, we use a 10-twelvemonth interest rate of 8.72%, as these two businesses throw shorter project maturities. The cost of debt for Marriott and for its three divisions is 10.25%, 10.05%, 10.12%, 10.52%, respectively. Grvt. Bond Marriott Lodging Restaurants Contract Services Beta of debt for Marriott 8.95% 8.95% 8.72% 8.72% blossom forth 1.30% 1.10% 1.40% 1.80% rd 10.25% 10.05% 10.12% 10.52% Maturities use 30 division use 30 year use 10 year use 10 year Normally, we charter debt beta is 0. In this case, we apprize calculate debt beta employ CAPM, and that is equal to 0.17. Credit revolve Market lay on the line Premium Beta...If you motive to get a copious essay, effect it on our website: Ordercustompaper.com

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