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Marriott Cost of Capital

 Marriott Cost of Capital Dissertation

Our objective was to find the challenge rates intended for Marriott's three divisions and for the firm as a whole. Marriott should locate the difficulty rates because of its divisions individually because their divisions function in independent industries and thus face different business dangers. Marriott's vp says that increasing the hurdle rate by 1% would decrease the present value of project inflows by 1%. As finding appropriate hurdle rates is critical to accepting or rejecting tasks, Marriott ought to be precise by simply calculating and using division-specific rates on division-specific tasks. We used the WACC method in order that our challenge rates will reflect ideal cost of debt and cost of equity, because explained within our subsequent research. We discovered Marriott's difficulty rates: almost eight. 646% pertaining to hotels, 12. 94% to get restaurants, eleven. 094% pertaining to contracts, and 9. 688% for the entire firm. Marriott should certainly use the division-specific hurdle prices when considering division-specific assignments. Using the general WACC to gauge a project inside the restaurant market, for example , could cause Marriott to incorrectly recognize a project, which in turn would eliminate wealth. The analysis as well led all of us to evaluate Marriott's four financial growth goals. First, we all found that by taking care of instead of proudly owning hotel resources, Marriott could hedge it is risks inside the currently volatile economy. Second, we were worried that Marriott's strategy of maximizing aktionar wealth by treating the projects like " related little boxes” instead of employing division-specific difficulty rates would decrease aktionar value. Third, we believe that Marriott's practice of environment a high concentrate on interest protection ratio instead of a D/E rate might prevent it

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