Marriot Corp: Cost of Capital

Marriott regularly calculates the warranted equity value for its common shares and whenever its stock price went below the warranted value, Marriott would repurchase its stock. This is beneficial to the company 's growth in a sense that if the company expects its share price to increase in the future, they can re-sell these shares to obtain capital gains. Moreover, repurchasing shares gives the market a signal that management believes the stock is underpriced. This is a positive sign to the market and may attract more equity investors for Marriott, hence raising more funds to support fast development.

Currently, Starbucks is considering making an investment in a new manufacturing plant in Augusta, GA. The capital budgeting project requires an initial investment outlay of $ 40 million and is expected to general annual cash flows of 5.200.000, 6.500.000, 8.200.000, 8.700.000, 9.000.000, 9.550.000, and 11.500.000 for years 1 to 7, respectively. Starbucks estimates that the project has a below-average risk and sets the discount rate at 8.06 % -- based on the company’s Weighted Average Cost Of Capital (WACC). The discount rate is effectively the desired return on an investment an

The vice president of project finance at Marriott Corporation, prepares recommendations annually for the hurdle rates at each of the firm¡¯s three divisions. In this reflective case, the company¡¯s policies and strategies related with hurdle rates and cost of capital are discussed. In the above context, the company¡¯s policy of repurchasing its shares is also

At first, WACC and CAPM was attempted to be used as a source of cost of capital. However, for WACC, there is no available proportion of debt and cost of debt for MW. For CAPM, no available data seems to support the acceptable

• What is the cost of capital for Marriott’s as a whole at the prevailing capital structure vs. at the target capital structure.

* We assume the cost of capital to be a stated annual rate to facilitate calculations;

For strategic planning purposes, Working’s management allocated depreciation to the existing Bernoulli division as though the entire division was an asset and depreciated it using the straight line method over 10 years, with five years of operation behind it. The initial investment of $56 million had been made in early 1999. The new funds allocated to the division would be treated similarly, except that management had decided that any new investment would be depreciated using the straight line method over 5 years; due to changes in the industry since 1999, this was expected to be more consistent with the nature of the market for computing devices and PDAs. Working’s managers used a weighted average cost of capital, or hurdle rate, of 14.5 percent when evaluating capital budgeting projects, and Jennifer felt that this would be an appropriate

Star Appliance is looking to expand their product line and is considering three different projects: dishwashers, garbage disposals, and trash compactors. We want to determine which project would be worth doing by determining if they will add value to Star. Thus, the project(s) that will add the most value to Star Appliance will be worth pursuing. The current hurdle rate of 10% should be re-evaluated by finding the weighted average cost of capital (WACC). Then by forecasting the cash flows of each project and discounting them by the WACC to find the net present value, or by solving for the internal rate of return, we should be able to see which projects Star should undertake.

To analyze the key for investing in projects, Marriott Corporation has to evaluate the hurdle rate for total firm operations as well as hurdles rate of each division by calculating the cost of capital by using the Weighted Average Cost of Capital (WACC). To calculate this value, Marriott has to evaluate the market of debt and equity, pretax cost of debt, after-tax cost of equity, value of the firm and the corporate tax rate.

The cost of capital is the minimum acceptable rate of return for new investments in the corporation. Estimates of Midland’s cost of capital are used in many analysis within Midland, including asset appraisal for both capital budgeting and financial accounting, performance assessments, M&A proposals, and stock repurchase decisions. These estimates are used at the divison or the business unit level and also on the corporate level. When asses the cost of capital on different levels of business, managers must invest in new ventures that have an expected rate of return higher than

Our analysis attempts to answer the question, “What are the things a company must consider when analyzing a new investment or project?” According to the text, a firm’s first objective when deciding to take on new debt should be that its return on net assets (RONA) should be greater than its weighted average cost of capital (WACC). Since we are working with an income statement only and do not have an amount for net assets, we will instead use return on invested capital (ROIC), which measures how well a company is using its money to generate returns. Comparing a company 's return on capital (ROIC) with its cost of capital (WACC) reveals whether invested capital was used effectively. From our spreadsheet calculations we see that using our estimated operating profit provides us with a 19.9% return on invested capital with only a 7.2% weighted average cost for that same capital. If these numbers are even close to correct, George should definitely make the move.

Team C will perform a capital valuation of the retail merchandising chain Target. To obtain the answers needed for the valuation, Team C will justify the current market of Target’s debt and equity by using various capital models of valuation. Team C will provide in-depth

The Ameritrade case study analysis brought in this paper comes to estimate the final cost of capital that should be applied to Ameritrade’s technology and marketing investment project. Allegedly, the final purpose of every WACC calculation is in helping to estimate the NPV of a project in order to make a “go\no go” decision, whether it is done by an investor or a creditor. However such a decision requires also the computation of future cash flows. Since we are missing the information regarding Ameritrade’s future cash flows, this paper has one and only goal – to evaluate and discuss the main possible alternatives for

You estimate that Panini Bread, being less established than the others, has risk requiring a return (WACC) of 14%. Dunkin Delights and McFarmers, both more established, require returns of 12%.

Mortensen’s estimates of Midlands’s cost of capital are. The Mortensen’s estimates are used for Asset appraisals for capital budgeting and accounting, assessment of performance analysis, merger and acquisition possible proposals, and possible stock repurchasing/issuing decisions or dividends and retained earnings. The Cost of capital is an essential component in WACC calculations.