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Learning Goal: I’m working on a english question and need guidance to help me le

by | Aug 30, 2022 | English | 0 comments

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Learning Goal: I’m working on a english question and need guidance to help me learn.
1/FIN 670: Case 1 Marriot Cost of Capital
The primary objective of this case is to estimate and analyze the cost of capital for a firm and its non-publicly traded divisions with differing risk characteristics.
The following is a list of questions that may help you analyze the case, but you don’t have to
limit your analysis to them. Assume a marginal tax rate of 42%. For purposes of your analysis, use arithmetic instead of geometric averages where averages are necessary. For purposes of your analysis, use the long-term treasury rates as the benchmark for estimating the cost of debt, and if you wish, you can ignore the fact that some of the debt is floating rate.
1. How does Marriott use its estimate of its cost of capital? Does this make sense? 2. What is Marriott’s overall cost of capital?
3. What risk-free rate did you use in your calculation? That is, short-term or long-term? Current or historical average? Why?
4. What risk premium did you use to calculate the cost of equity? 5. How did you measure Marriott’s cost of debt?
6. What type of investments would you value using Marriott’s overall weighted cost of capital (WACC)?
7. If Marriott used a single corporate hurdle rate for evaluating investment opportunities in each of its lines of business, what would happen to the company over time?
8. What is the cost of capital for Marriott’s lodging and restaurant divisions (note: use the same “for purposes of your analysis” notes described above where applicable)?
9. What risk-free rate and risk premium did you use to calculate the cost of equity for each division? Why did you choose these numbers?
10. How did you measure each division’s cost of debt? Should the debt cost differ across divisions? Why?
11. How did you measure the beta of each division?
12. What is the cost of capital for Marriott’s contract services division? (Note that the case does not provide any information regarding publicly traded comparable companies for contract service)
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