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This document outlines 7 questions for discussion of a case study on Marriott Corporation's cost of capital. The questions address whether Marriott's financial strategy supports its growth objective, how it uses its cost of capital estimate, calculating its weighted average cost of capital, appropriate investments to value using its WACC, potential issues with a single hurdle rate across divisions, and estimating costs of capital for specific divisions, including its contract services division.
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Finance Case Study of Mariott Hotel and its Financial Strategy
This document outlines 7 questions for discussion of a case study on Marriott Corporation's cost of capital. The questions address whether Marriott's financial strategy supports its growth objective, how it uses its cost of capital estimate, calculating its weighted average cost of capital, appropriate investments to value using its WACC, potential issues with a single hurdle rate across divisions, and estimating costs of capital for specific divisions, including its contract services division.
This document outlines 7 questions for discussion of a case study on Marriott Corporation's cost of capital. The questions address whether Marriott's financial strategy supports its growth objective, how it uses its cost of capital estimate, calculating its weighted average cost of capital, appropriate investments to value using its WACC, potential issues with a single hurdle rate across divisions, and estimating costs of capital for specific divisions, including its contract services division.
Source Document: HBS case- Marriott Corporation: cost of capital
These are some leading questions for our case discussion on 07.02.2015 1. Are the four components of Marriotts financial strategy consistent with its growth objective? 2. How does Marriott use its estimate of cost of capital? Does it make sense? 3. What is the WACC for Marriott Corp? a. What risk-free rate and risk premium would you use to calculate the cost of equity? b. How would you measure Marriotts cost of Debt? 4. What type of investments would you value using Marriotts WACC? 5. If Marriott used a single corporate hurdle rate foe evaluating investment opportunities in each of its lines of business, what would happen to the company over time? 6. What is the cost of capital for lodging and restaurant divisions of Marriott? a. What risk-free rate and risk premium would you use in calculating the cost of equity for each division? Why would you choose these numbers? b. How would you measure the cost of debt for each division? Should the debt cost differ across divisions? Why? c. How would you measure the beta of each division? 7. What is the cost of capital for Marriotts contract services division? How can you estimate its equity costs without publicly traded comparable companies?
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