Marriot Case

Case

 Study:

 Marriott

 Corporation

The

 Cost

 of

 Capital

Teresa

 Cortez

Keith

 Gemmell

Brandon

 Papsidero

Robin

 Reschke

October

 28,

 2013

Table

 of

 Contents

1.

  Are the four components of Marriott’s financial strategy consistent with its growth

objective? ...................................................................................................................... 1

2.

  How does Marriott use its estimate of its cost of capital? Does this make sense? ...... 3

3.

  What is the weighted average cost of capital for Marriott Corporation? ..................... 4

4.

  What type of investments would you value using Marriott’s WACC? ........................ 6

5.

  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? ......... 7

6.

  What is the cost of capital for the lodging and restaurant divisions of Marriott? ........ 8

7.

  What is the cost of capital for Marriott’s contract services division? How can you

estimate its equity costs without publicly traded comparable companies? ................ 11

APPENDIX I – Math Utilized to Derive WACC for Marriott .......................................... 13

APPENDIX II – Math Utilized to Derive WACC for Divisions ...................................... 16

BA

 626

 Financial

 Decision

 Making

ii

1.

 Are

 the

 four

 components

 of

 Marriott’s

 financial

 strategy

 consistent

 with

its

 growth

 objective?

The

  four

  components

  of

  Marriott’s

  financial...