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Marriott Corporation: The Cost of Capital (abridged) Analysis.
The first 200 words of this essay...
Marriott Corporation: The Cost of Capital (abridged) Analysis
The Vice President of Finance of Marriott Corporation, Dan Cohrs, must make annual recommendations on hurdle rates for the restaurant, lodging, and contract services divisions as well as Marriott Corporation as a whole. It is important that Mr. Cohrs makes an appropriate recommendation for each division because hurdles rates influence project investment decisions, repurchase decisions for the firm. Given the information that Mr. Cohrs has, he is faced with two major problems in determining the hurdle rates. The first problem is that he must decide which data he will use to calculate the rates. There are future, present, and past numbers that are available for his use in the calculations. The second problem is that there is little information given about the contract division and Marriott Corporation as a whole, making it difficult to calculate the weighted average cost of capital (WACC) for the contract division and Marriott as a whole. Mr. Cohrs has comparable data for the lodging and restaurant divisions but not the contract services or the corporation as a whole. In calculating WACC, the cost of capital for the corporation as a whole should be
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