Questions for Hbs Case “Marriott Corporation: the Cost of Capital”

Case write up two: Marriott Corporation:

DUE DATE: 7/12/2012

Questions for HBS case “Marriott Corporation: The cost of capital”

1) Are the four components of Marriott's financial strategy consistent with its growth objective?

2) How does Marriott use its estimate of its cost of capital? Does this make sense?

3) What is the Weighted Average Cost of Capital for Marriott Corporation?

a) What risk free rate and risk premium did you use to calculate the cost of equity?

b) How did you measure Marriott's cost of debt?

4) What type of investments would you value using Marriott's WACC?

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 overtime?

6) What is the cost of capital for the lodging and restaurant divisions of Marriott?

a) What risk-free rate and risk premium did you use in calculating the cost of equity for each division? Why did you choose these numbers?

b) How did you measure the cost of debt for each division? Should the debt cost differ across divisions? Why?

c) How did you measure the beta of each division?

7) What is the cost of capital for Marriott's contract services division? How can you estimate its equity cost of capital without publicly traded comparable companies?

Problem set 1(from the textbook 10th edition)

We will send the question numbers soon

DUE DATE: 7/17/2012

Note this date is different from the date on the syllabus. This is the due date!