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Weighted Average Cost of Capital and Marriott Corporation Essay example

Satisfactory Essays
Butler Lumber Company

1. Why does Mr. Butler have to borrow so much money to support this profitable business?

2. Do you agree with his estimate of the company’s loan requirements? How much will he need to borrow to finance his expected expansion in sales (assume a 1991 sales volume of $3.6 million)

3. As Mr. Butler’s financial adviser, would you urge him to go ahead with, or to reconsider, his anticipated expansion and his plans for additional debt financing? As the banker, would you approve Mr. Butler’s loan request, and, if so, what conditions would you put on the loan?

Toy World

1. What factors could Mr. McClintock consider in deciding whether or not to adopt the level production plan?

2. What savings would be
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A lower payout ratio?

4. From an investor’s perspective, is FPL’s payout ratio appropriate?

5. As Kate Stark, what would you recommend regarding investment in FPL’s stock – buy, sell, or hold?

Marriott Corporation (Event Risk)

1. Why is Marriott’s chief financial officer proposing Project Chariot?

2. Is the proposed restructuring consistent with management’s responsibilities?

3. The case describes two conceptions of managers’ fiduciary duty (p. 9). Which do you favor: the shareholder conception or the corporate conception? Does your stance make a difference in this case?

4. Should Mr. Marriott recommend the proposed restructuring to the board?

Star River Electronics, Ltd.

1. Please assess the current financial health and recent financial performance of the company. What strengths and/or weaknesses would you highlight to Adeline Koh?

2. Please forecast the financial statements of the firm for 2002 and 2003. What will be the external financing requirements of the firm in those years? Can the firm repay its loan within a reasonable period?

3. What are the “key driver” assumptions of the firm’s future financial performance? What are the managerial implications of these key drivers? That is, what aspects of the firm’s activities should Koh especially focus on?

4. What is Star River’s weighted average cost of capital (WACC)? What methods did you use to estimate the WACC? What key assumptions especially influence
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