Using the financial statements mentioned above estimate the annual rate of interest paid by the corporation (cost of debt). Also, find the tax rate and capitalization ratio (proportions among equity and debt). Using these values that you have found estimate the annual weighted cost of capital (WACC) of the corporation. Income statement PERIOD ENDING: 12/31/2019 Total Revenue $20,972,000 Cost of Revenue $17,755,000 Gross Profit $3,217,000 OPERATING EXPENSES Research and Development $0 Sales, General and Admin. $938,000 Non-Recurring Items $138,000 Other Operating Items $341,000 Operating Income $1,800,000 Add'l income/expense items $180,000 Earnings Before Interest and Tax $1,993,000 Interest Expense $394,000 Earnings Before Tax $1,599,000 Income Tax $326,000 Minority Interest $13,000 Equity Earnings/Loss Unconsolidated Subsidiary $0 Net Income-Cont. Operations $1,286,000 Net Income $1,273,000 Net Income Applicable to Common Shareholders $1,273,000 Balance sheet PERIOD ENDING: 12/31/2019 12/31/2018 12/31/2017 12/31/2016 CURRENT ASSETS Cash and Cash Equivalents $225,000 $316,000 $383,000 $858,000 Short-Term Investments $0 $0 $0 $0 Net Receivables $2,395,000 $2,133,000 $1,973,000 $1,695,000 Inventory $0 $0 $0 $0 Other Current Assets $507,000 $257,000 $384,000 $818,000 Total Current Assets $3,127,000 $2,706,000 $2,740,000 $3,371,000 LONG-TERM ASSETS Long-Term Investments $694,000 $857,000 $876,000 $973,000 Fixed Assets $2,792,000 $1,956,000 $1,793,000 $2,335,000 Goodwill $9,048,000 $9,039,000 $9,207,000 $7,598,000 Intangible Assets $8,641,000 $8,380,000 $8,544,000 $9,270,000 Other Assets $595,000 $587,000 $593,000 $477,000 Deferred Asset Charges $154,000 $171,000 $93,000 $116,000 Total Assets $25,051,000 $23,696,000 $23,846,000 $24,140,000 CURRENT LIABILITIES Accounts Payable $3,442,000 $3,075,000 $3,288,000 $2,972,000 Short-Term Debt / Current Portion of Long-Term Debt $977,000 $833,000 $398,000 $309,000 Other Current Liabilities $2,258,000 $2,529,000 $2,121,000 $1,866,000 Total Current Liabilities $6,677,000 $6,437,000 $5,807,000 $5,147,000 Long-Term Debt $9,963,000 $8,514,000 $7,840,000 $8,197,000 Other Liabilities $6,578,000 $5,304,000 $5,429,000 $4,419,000 Deferred Liability Charges $1,130,000 $1,216,000 $1,188,000 $1,020,000 Misc. Stocks $0 $0 $0 $0 Minority Interest $0 $0 $0 $0 Total Liabilities $24,348,000 $21,471,000 $20,264,000 $18,783,000 STOCK HOLDERS EQUITY Common Stocks $5,000 $5,000 $5,000 $5,000 Capital Surplus $9,644,000 $8,982,000 $7,242,000 $6,501,000 Retained Earnings ($14,385,000) ($12,185,000) ($9,418,000) ($6,460,000) Treasury Stock $5,800,000 $5,814,000 $5,770,000 $5,808,000 Other Equity ($361,000) ($391,000) ($17,000) ($497,000) Total Equity $703,000 $2,225,000 $3,582,000 $5,357,000 Total Liabilities & Equity $25,051,000 $23,696,000 $23,846,000 $24,140,000 Stock price Average Stock Price 2020 102.9253 2019 129.373 2018 129.5615 2017 103.2572 2016 69.5865 2015 75.7721 2014 63.2982 2013 42.1856 2012 37.0968 2011 33.7237 2010 33.7203 2009 21.9637 2008 27.6382 2007 43.4326 2006 37.4723 2005 32.1651 2004 24.4984 2003 19.0586 2002 18.2184 2001 20.7659 2000 17.7474 Company name Marriot

Using the financial statements mentioned above estimate the annual rate of interest paid by the corporation (cost of debt). Also, find the tax rate and capitalization ratio (proportions among equity and debt). Using these values that you have found estimate the annual weighted cost of capital (WACC) of the corporation. Income statement PERIOD ENDING: 12/31/2019 Total Revenue $20,972,000 Cost of Revenue $17,755,000 Gross Profit $3,217,000 OPERATING EXPENSES Research and Development $0 Sales, General and Admin. $938,000 Non-Recurring Items $138,000 Other Operating Items $341,000 Operating Income $1,800,000 Add'l income/expense items $180,000 Earnings Before Interest and Tax $1,993,000 Interest Expense $394,000 Earnings Before Tax $1,599,000 Income Tax $326,000 Minority Interest $13,000 Equity Earnings/Loss Unconsolidated Subsidiary $0 Net Income-Cont. Operations $1,286,000 Net Income $1,273,000 Net Income Applicable to Common Shareholders $1,273,000 Balance sheet PERIOD ENDING: 12/31/2019 12/31/2018 12/31/2017 12/31/2016 CURRENT ASSETS Cash and Cash Equivalents $225,000 $316,000 $383,000 $858,000 Short-Term Investments $0 $0 $0 $0 Net Receivables $2,395,000 $2,133,000 $1,973,000 $1,695,000 Inventory $0 $0 $0 $0 Other Current Assets $507,000 $257,000 $384,000 $818,000 Total Current Assets $3,127,000 $2,706,000 $2,740,000 $3,371,000 LONG-TERM ASSETS Long-Term Investments $694,000 $857,000 $876,000 $973,000 Fixed Assets $2,792,000 $1,956,000 $1,793,000 $2,335,000 Goodwill $9,048,000 $9,039,000 $9,207,000 $7,598,000 Intangible Assets $8,641,000 $8,380,000 $8,544,000 $9,270,000 Other Assets $595,000 $587,000 $593,000 $477,000 Deferred Asset Charges $154,000 $171,000 $93,000 $116,000 Total Assets $25,051,000 $23,696,000 $23,846,000 $24,140,000 CURRENT LIABILITIES Accounts Payable $3,442,000 $3,075,000 $3,288,000 $2,972,000 Short-Term Debt / Current Portion of Long-Term Debt $977,000 $833,000 $398,000 $309,000 Other Current Liabilities $2,258,000 $2,529,000 $2,121,000 $1,866,000 Total Current Liabilities $6,677,000 $6,437,000 $5,807,000 $5,147,000 Long-Term Debt $9,963,000 $8,514,000 $7,840,000 $8,197,000 Other Liabilities $6,578,000 $5,304,000 $5,429,000 $4,419,000 Deferred Liability Charges $1,130,000 $1,216,000 $1,188,000 $1,020,000 Misc. Stocks $0 $0 $0 $0 Minority Interest $0 $0 $0 $0 Total Liabilities $24,348,000 $21,471,000 $20,264,000 $18,783,000 STOCK HOLDERS EQUITY Common Stocks $5,000 $5,000 $5,000 $5,000 Capital Surplus $9,644,000 $8,982,000 $7,242,000 $6,501,000 Retained Earnings ($14,385,000) ($12,185,000) ($9,418,000) ($6,460,000) Treasury Stock $5,800,000 $5,814,000 $5,770,000 $5,808,000 Other Equity ($361,000) ($391,000) ($17,000) ($497,000) Total Equity $703,000 $2,225,000 $3,582,000 $5,357,000 Total Liabilities & Equity $25,051,000 $23,696,000 $23,846,000 $24,140,000 Stock price Average Stock Price 2020 102.9253 2019 129.373 2018 129.5615 2017 103.2572 2016 69.5865 2015 75.7721 2014 63.2982 2013 42.1856 2012 37.0968 2011 33.7237 2010 33.7203 2009 21.9637 2008 27.6382 2007 43.4326 2006 37.4723 2005 32.1651 2004 24.4984 2003 19.0586 2002 18.2184 2001 20.7659 2000 17.7474 Company name Marriot

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter2: Financial Statements, Cash Flow,and Taxes

Section: Chapter Questions

Problem 18P: Rhodes Corporations financial statements are shown after part f. Suppose the federal-plus-state tax...

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Income statement

PERIOD ENDING:	12/31/2019
Total Revenue	$20,972,000
Cost of Revenue	$17,755,000
Gross Profit	$3,217,000
OPERATING EXPENSES
Research and Development	$0
Sales, General and Admin.	$938,000
Non-Recurring Items	$138,000
Other Operating Items	$341,000
Operating Income	$1,800,000
Add'l income/expense items	$180,000
Earnings Before Interest and Tax	$1,993,000
Interest Expense	$394,000
Earnings Before Tax	$1,599,000
Income Tax	$326,000
Minority Interest	$13,000
Equity Earnings/Loss Unconsolidated Subsidiary	$0
Net Income-Cont. Operations	$1,286,000
Net Income	$1,273,000
Net Income Applicable to Common Shareholders	$1,273,000

Balance sheet

PERIOD ENDING:	12/31/2019	12/31/2018	12/31/2017	12/31/2016
CURRENT ASSETS
Cash and Cash Equivalents	$225,000	$316,000	$383,000	$858,000
Short-Term Investments	$0	$0	$0	$0
Net Receivables	$2,395,000	$2,133,000	$1,973,000	$1,695,000
Inventory	$0	$0	$0	$0
Other Current Assets	$507,000	$257,000	$384,000	$818,000
Total Current Assets	$3,127,000	$2,706,000	$2,740,000	$3,371,000
LONG-TERM ASSETS
Long-Term Investments	$694,000	$857,000	$876,000	$973,000
Fixed Assets	$2,792,000	$1,956,000	$1,793,000	$2,335,000
Goodwill	$9,048,000	$9,039,000	$9,207,000	$7,598,000
Intangible Assets	$8,641,000	$8,380,000	$8,544,000	$9,270,000
Other Assets	$595,000	$587,000	$593,000	$477,000
Deferred Asset Charges	$154,000	$171,000	$93,000	$116,000
Total Assets	$25,051,000	$23,696,000	$23,846,000	$24,140,000
CURRENT LIABILITIES
Accounts Payable	$3,442,000	$3,075,000	$3,288,000	$2,972,000
Short-Term Debt / Current Portion of Long-Term Debt	$977,000	$833,000	$398,000	$309,000
Other Current Liabilities	$2,258,000	$2,529,000	$2,121,000	$1,866,000
Total Current Liabilities	$6,677,000	$6,437,000	$5,807,000	$5,147,000
Long-Term Debt	$9,963,000	$8,514,000	$7,840,000	$8,197,000
Other Liabilities	$6,578,000	$5,304,000	$5,429,000	$4,419,000
Deferred Liability Charges	$1,130,000	$1,216,000	$1,188,000	$1,020,000
Misc. Stocks	$0	$0	$0	$0
Minority Interest	$0	$0	$0	$0
Total Liabilities	$24,348,000	$21,471,000	$20,264,000	$18,783,000
STOCK HOLDERS EQUITY
Common Stocks	$5,000	$5,000	$5,000	$5,000
Capital Surplus	$9,644,000	$8,982,000	$7,242,000	$6,501,000
Retained Earnings	($14,385,000)	($12,185,000)	($9,418,000)	($6,460,000)
Treasury Stock	$5,800,000	$5,814,000	$5,770,000	$5,808,000
Other Equity	($361,000)	($391,000)	($17,000)	($497,000)
Total Equity	$703,000	$2,225,000	$3,582,000	$5,357,000
Total Liabilities & Equity	$25,051,000	$23,696,000	$23,846,000	$24,140,000

Stock price

	Average Stock Price
2020	102.9253
2019	129.373
2018	129.5615
2017	103.2572
2016	69.5865
2015	75.7721
2014	63.2982
2013	42.1856
2012	37.0968
2011	33.7237
2010	33.7203
2009	21.9637
2008	27.6382
2007	43.4326
2006	37.4723
2005	32.1651
2004	24.4984
2003	19.0586
2002	18.2184
2001	20.7659
2000	17.7474

Company name Marriot

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