Marriott

Marriott Questions: ONLY use data from the case for these questions.

1. What is your analysis of the four components of strategy for Marriott? Are they consistent with growth objectives? With value creation?

2. What is your evaluation of Marriott’s process of determining its cost of capital? Derive an estimate of Marriott’s cost of capital. Be specific about your underlying logic regarding estimation of risk free rate, risk premium, cost of debt and any other issue relevant to your estimate.

3. Which projects should be analyzed using the cost of capital estimated in Question 2? Should Marriott use this cost of capital to evaluate projects in each of the three lines of business? Why? Why not?

4. Estimate appropriate cost of capital for the lodging and restaurant divisions. Be specific about your underlying logic regarding estimate of beta, risk free rate, risk premium and cost of debt. Comment on the process and selection of comparable firms for each division.

5. Estimate the cost of capital for Marriott’s contract services division. How can you estimate its beta and component cost of capital (equity and debt) without the availability of a publicly traded firm?

Fast forward to today.

6. Ignoring the information in the case, what is Marriott’s cost of capital today? (Perform this analysis as we discussed in class.) What is the main driver of the difference between today’s cost of capital and the one calculated in #2?

7. Using 3 comparable firms for each division, what is the current cost of capital for the restaurant and lodging divisions? (Perform this analysis as we learned in class and assume any non-return related items are the same as in the case.)