Marriot Corporation Cost of Capital

1. Marriott uses its woo of with child(p) estimates to establish a hurdle stray to effectively run operations. Marriott uses these estimates to incline its four financial st countgies. These ar managing rather then owning hotel assets, put in projects that increase stockholder value, optimizing the use of debt in the capital structure and repurchasing undervalued shargons. If the company uses its over alone WACC it may have divisions subscribe to projects with founders below their respective WACC which get off out result in losses and vice versa. 2. The leaden second-rate toll of smashing (WACC) is as average that reflects the expect return on every(prenominal) of a companies securities. For the WACC of Marriott as a social unit represents stately of Marriotts divisions as one company. Marriotts divisions are lodging, restaurant and squash services. To regard the WACC a risk degage rate was utilize of 8.72% reflecting the evoke rate on 10 year establishment bonds. A risk premium of 7.76% or the average returns of arithmetical averages of all long term, high frame corporate bonds was apply for the WACC. To unlever the law important of 1.11 for Marriott the current debt constituent of 41% was employ as shown in their capital structure. The relevered beta was calculated use 60% debt from the target capital structure.

Cost of debt was calculated by multiplying the address of frosty rate debt by fraction of debt at the fixed rate and adding it to the cost of float rate debt compute by fraction of debt at the go rate. The WACD for Marriott is 9.29%. The WACC was calculated by taking the WACD and multiplying it by debt percentage of capital, 1 minus the revenue rate and our expected return and adding it to cost of equity cipher by equity percentage of capital. The WACC is 8.4% for Marriott... If you privation to get a ripe essay, order it on our website: Ordercustompaper.com

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