This website uses cookies to ensure you have the best experience. Learn more

Mariott Case Analysis

1057 words - 5 pages

Marriott Case Study

In this summary, we are going to discuss Marriott’s strategy points for maintaining its status as a premier growth company, weighted average cost of capital (WACC), divisional hurdle rates, and justification of numbers used in calculations.
Marriott’s strategic plan to maintain its status as a premier growth company can be broken into four distinct areas: managing (as opposed to owning) hotel assets, choosing investments that increase shareholder value, optimizing the use of debt within the capital structure, and repurchasing undervalued shares. The choice to manage hotel assets has the benefit of freeing up capital to invest in other opportunities. This allows for ...view middle of the document...

When Marriott estimated this, they used the long term debt for lodging calculations and short term debt for their restaurant and contract services division calculations. They made this decision based on the claim that lodging assets have a longer useful life than do the assets of restaurants or contract services.
However, the analysis described in this summary uses the weighted percentage of fixed and floating debt to calculate the cost of debt, according to their target leverage ratios provided. We used the 1988 10 year Treasury bill return as the long term risk free rate in capital calculations. Conversely, the risk free rate for short term debt is based on the 1988 1 year Treasury bill rate. Estimating costs of capital relative to each division is a logical approach and well developed use of the cost of capital. The divisions must be broken out for these estimates because their costs of capital vary. Marriott’s approach of dividing up the debt was correct, but poorly implemented, as long and short term debt should have been allocated to each division with appropriate weight.
To estimate Marriott’s corporate WACC, the given beta of .97 was used. The market return was estimated as the geometric average of the S&P average return from 1981 to 1987. The geometric average was used here because it takes compounding into consideration and is a generally more conservative estimate. The market return was then used to find the market risk premium by subtracting the risk free rate from the market return. These variables were then used in the formula shown below, yielding a company WACC of 8.8391.
WACC = WD(Wfloating(Rshort term + RPM) + Wfixed(Rlong term + RPM))*(1-T) + WE(Rlong term +B(RS&P geo avg 81 -87 – Rlong term))
This WACC would be used for non-operational asset investments, and would not be relevant in decisions about divisional projects. WACCs calclulated for each division would be used for this purpose. If the overall WACC were utilized to evaluate the profitability of a divisional project, some divisions may take on projects with a negative net present value, while other divisions may ignore projects with a positive net present...

Other Papers Like Mariott Case Analysis

Holidays In Albania Essay

1636 words - 7 pages Have you ever thought about having exciting and incredibly cheap vacations? Albania might be the right choice. According to My Travel Guide, Albania is ranked the fourth among ten places worth visiting in Eastern Europe (“Top 10 Eastern European Destinations”). One can encounter three kinds of vacations in this Mediterranean country: winter, summer, and cultural. The ideal places to spend your winter vacations are the Albanian Alps. They are

A Heart Of Darkness Essay

1748 words - 7 pages In this short story, there are frequent significant subject and ideas that make the story, "A Heart of Darkness," by Joseph Conrad, and haunting novel. The main theme is absolute white power over the natives. The theme validates the corruption, and the dependence caused by the white people as they took over the Congo. White men were giving all the power; they had no self-control, and in the end they did not use wisely. The white men became

The Aspects Of Vulnerability Among The Exploited In Medical Research

2287 words - 10 pages proceeding examples. The Willowbrook Hepatitis Studies was a case in which individual rights were severed and respect for one’s autonomy was lost. In 1947, in Staten Island, NY, Willowbrook was opened. Willowbrook State School was a state-funded institution for developmentally disabled children intended to accommodate approximately 4,000. By 1965, that number reached a population high of about 6,000. This high population mixed with a short staff led

The Hitchhiker’S Guide To The Galaxy

1171 words - 5 pages The Hitchhiker’s Guide to the Galaxy As the human race makes life-changing discoveries, it is made apparent that there is always more to learn as the universe, instead of becoming familiar, is becoming absurd. The Hitchhiker’s Guide to the Galaxy, written by Douglas Adams, as well as the 2005 film adaption, portrays absurdity to be an all-encompassing system in the universe. Through the introduction and attempt to understand lack of reason, the

The Ford Motor Company Wage Increase Of 1914 And The Theory Of Incentives And Efficiency Wages

1252 words - 6 pages doubling these wages can only be justified if, in some other way, it generates an equal or superior amount of value (either through a better product, lower costs, or both). According to the theory of incentives and efficiency wages, this is indeed the case, and Henry Ford even asserted that this decision was one of the best-cost cutting judgements they ever made (Raff and Summers 1987). This paper will outline the history of Ford Motor’s 1914

Historical Analysis Of The Economical Breakthroughs Of The Industrial Revolution

1396 words - 6 pages A Historical Analysis of the Economical Breakthroughs of the Industrial Revolution During the Industrial Revolution, many elements of society experienced huge breakthroughs that would change the way they functioned forever. Economics were definitely one of them. With many new inventions and many factories appearing, many, many, more resources were being created than ever before. Also, all of the revenue from these resources was being given

Leadership Portrayed in Monologue from Shakespeare’s Henry V

1214 words - 5 pages for their family and their country’s reputation. (Jacqueline and Milton, 2012)In real life case, a successful leader usually has good communication skill when talk to followers, people cannot influence their team members without connect communication to them. Language is a most powerful tool used by leader to manage and influence people in different industries. (Seargeant, 2009) Henry’s speech with unlimited energy and confidence, he cheers up

Cuba Civil Rights

1906 words - 8 pages Oct 2013. "World Report 2013 Cuba."Human Rights Watch.Human Rights Watch, 2013.Web. 14 Oct 2013. Wylie, Lana. "The Special Case of Cuba."International Journal 67.3 (2012): 661-84. ProQuest.Web. 9 Oct. 2013. "2012 Human Rights Reports: Cuba." U.S Department of State Diplomacy in Action.Bureau of Public Affairs, 19 04 2013.Web. 14 Oct 2013.

US Freight System

1273 words - 6 pages “Free Riders” are part of the business. When the Supreme Court decides a case that NITL has analyzed and promoted from the beginning, that decision applies across the land, everyone benefit from it. Bruce J. Carlton The League members pay a membership due every year, and they expect as a return a benefit, and whenever NITL accomplish goals, its members benefit but all the other shippers benefit as well. This is a threat that open the door

Democratic Peace Theory

1852 words - 8 pages the United States against the USSR as an example of how emotions almost destroyed two nations. People were spying on their own family members out of fear of being branded a communist and the fear of nuclear annihilation was ever present danger that children were doing drills in case of nuclear fallout. Had it not been for Gorbachev assuming power in Russia and letting his people see what freedom was about through his policies, we would not be here

Booker T. Washington

1621 words - 7 pages “Success is to be measured not so much by the position that one has reached in life as by the obstacles which he has overcome” –Booker T. Washing. Booker Taliaferro Washington was born in Hale’s Ford, Virginia on April 5th, 1856 to Jane Burroughs and an unknown White man. Washington was married three times. His first wife was Fannie N. Smith from Malden, West Virginia. Booker and Fannie were married in the summer of 1882 and had one child

Related Essays

Feasibility Study Does Not Mean Feasible

2794 words - 12 pages feasibility study is, the recommended steps to get to the feasibility stage, and the pitfalls of not following all the steps. What is a Feasibility Study? Let us start at the very beginning with the definition of a feasibility study. A feasibility study is an engineering study based on test work and engineering analysis, which presents enough information to determine whether or not the project should be advanced to the final engineering and construction

Freedom And Responsibility Essay

2141 words - 9 pages amendment is “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercises thereof” (Jordan, 1999). Therefore, the first amendment states citizens have freedom of religion and exercises of the religion. The article entitled “Lawsuit alleges FBI violated Muslims’ freedom of religion,” published by Jerry Markon, Washington Post Staff Writer, justifies the detailed case of the FBI surveillance targeting Muslims for

Hate Crime Laws Essay

2348 words - 10 pages Death of James Byrd”). While this particular case may give the appearance that perpetrators of hate crimes receive appropriate punishment, almost a decade later, one particular case demonstrates the inequity in the application of hate crime punishments: In 2007, Sean Kennedy of Charleston, South Carolina, left a bar around 3:45 am and was confronted by Stephen Moller, who called him a “faggot” and then punched him so hard in the face that his

Rational Emotional Behavior Therapy Case Study Conceptualization And Treatment Plan

2140 words - 9 pages Rational Emotional Behavior Therapy Case Study of Sarah: A Conceptualization and Treatment Plan Rational emotive behavior therapy, REBT, was developed by Albert Ellis and holds the central belief that the events in our lives do not cause our disturbances but that they are instead caused by our view of the events (Murdock, 2009). Murdock (2009) states that “people are seen as responsible for their behavior” (p. 279) but, because they are