Weighted average cost of capital for Marriot Corporation: In order to determine cost of capital, first we need to find out cost of equity and cost of debt. For determining the cost of equity we need to determine the beta for the target leverage ratio. According to the information provided by exhibit 3 equity beta is estimated at 0.97 when equity-to-total capital ratio is 0.59. Therefore we need to find unlevered beta value so that we can find firm’s equity beta at the desired leverage ratio as mentioned in Table A. Tax bracket of 44% is used based on ratio of income taxes to income before income taxes (175.9/398.9) in Exhibit 1. Beta Unlevered (βU) = 0.97 / [1+ (1-0.44) (0.41/0.59)] = 0.6982 Calculating beta at the targeted leverage …show more content…
(WACC) = 0.6× [(1-0.44)10.25] + 0.4 × 18.49 = 10.83% Did you use arithmetic or geometric averages to measure rates of return? We used arithmetic average to determine the annual rate of return. As rate of return calculated using arithmetic average gives higher return compared to geometric average, investors are more likely to estimate their future return based on arithmetic average measure. Hence we use arithmetic average to measure the rate of return to match the expected rate of return required by investors. What type of investments would you value using Marriott’s WACC? Marriot’s WACC can be used to value the investments having similar characteristics and divisions which were used to determine the WACC. If Marriott used a single corporate hurdle rate for evaluating investment opportunities in each of its lines of business, what would happened to the company over …show more content…
While determining beta we need to find out average unlevered beta of similar divisions. Lodging From Exhibit 3 Calculation of unlevered equity beta βU = β/1+(1-tax rate) × (Debt/Equity) Equity Beta Market Leverage Hilton Hotels Corporation 0.88 14% 0.80 Holiday Corporation 1.46 79% 0.47 La Quinta Motor Inns 0.38 69% 0.16 Ramada Inns 0.95 65% 0.46 Average unlevered beta 0.47 Now, calculating levered beta at given target ratio Beta levered (ΒL) = 0.47[1+ (1-0.44) (0.74/0.26)] = 1.21 For lodging division we use 30-year U.S Government Interest rate given in Table B as a risk-free rate which is 8.95%, and for risk premium we use arithmetic average spread between S&P 500 Composite Returns and Long-Term U.S Government Bond Returns given in Exhibit 5 which is 7.43%. Now, Cost of equity (Re) = 8.95% + 1.21×7.43% = 17.94% While determining the cost of debt we again used 8.95%,30 year U.S. Government Interest Rate given in Table B as the risk free rate plus 1.10% debt rate premium above Government rate, which is given in Table A. Cost of debt (Rd) = 8.95% + 1.10% =
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National Debt The growing national deficit is a looming problem in the United States now more than ever. The national debt is constantly increasing and government spending is out of control. If these issues are not solved, then they could spell disaster for the nation’s economy. But an even bigger concern is how our Government plans to balance the budget and pay off the Federal Deficit.
Assuming ST is the price of gold in one year. Trader A makes a profit of ST ̶ 1000 and Trader B makes a profit of max (ST ̶ 1000, 0) –100. Trader A does better if the price is above $900, while trader B starts making actual profit above $1100, when the amount exceeds the price of gold plus premium. iv. A company has a $20 million portfolio with a beta of 1.2.
Traditionally, pro forma earnings are lampooned as “earnings before the bad stuff”, which are lower than the figure according the GAAP. Companies may present to the public their earnings and results of operations on the basis of methodologies other than GAAP. And this presentation in the earnings release is often referred to as “pro forma” financial information. Many companies were thought to be using pro forma figures not only to exclude one-time charges, but also to strip put recurrent costs and other elements that they claimed concealed their “true” performance. “Pro forma” financial information can serve useful purposes.
Analyze the company internationalization. (Are they operating internationally, if so where? And how are they performing over there?) Shangri-La hotel and resorts was originated in 1971 and was a flagship hotel in Singapore. Currently there are fifty five deluxe resorts and hotels around the world based on the Hong Kong hotel chain.
The debt to ratio is a ratio that compares a firms total liabilities and shareholders’ equity. It shows the proportion of the amount of money invested by the business owners as well as external entities. Debt to Equity Ratio = Total Liabilities/Shareholders’ Equity = $80,994/$931,490
Analysis of Financial Statements Student number: 10221450 Word count: 2993 words Excluding Bibliography Course code: B9AC106 Course title: Financial Analysis Lecturer: Mr. Enda Murphy Company: Whitbread PLC Table of Contents 1. Whitbread plc 3 Financial Ratio Comparison 6 1.1 Profitability Ratio 6 1.2 Liquidity Ratio 9 1.3 Efficiency Ratio 11 2. Intercontinental hotels group plc and Ratio Comparison with Whitbread 12 3. 10% Stake in Intercontinental Hotels Group PLC 13 Conclusion 16 Market Value and Book Value
METHODOLOGY Both quantitiave and subjective strategies were utilized to see in respect to why employee maintenance happens inside of the association. This examination was directed on Marriott Hotel, which is a high estimated industry in cordiality segment. An arbitrary stratified example of ex-employees from all offices/ areas was chosen which included non-administration, center level administration and senior administration employees. Reviews alongside a presentation document clarifying the centrality and the requirement for directing the same were sent to each of the 225 ex-employees over 17 unique areas crosswise over US.
Cost of equity was calculated using the 10 year UST rate, 5.02%, because it is a good measurement of the risk free rate, plus the firm’s beta, 0.56, multiplied by the risk premium, which we concluded to be 5%. This gave Blaine, when unlevered, a WACC of 7.82%. When taking the $40 million debt and $100 million cash buyout of stocks into account, cost of debt is now a factor. Cost of debt was 5.88%, the bond rating of a AAA rated company like we assume Blaine
4.2.1 JO MALONE 184.108.40.206 Strategy Jo Malone Company takes its name from the brand creator. Jo Malone was a stylist that wanted to give a special present to her VIP clients, creating a special bath oil with natural ingredients like nutmeg and Ginger. (Gordo, 2013) Jo Malone London was created to celebrate British style with unexpected fragrances and the elegant art of gift giving.
1 What is Outrigger Hotels and Resorts’ strategic position? What are the firm’s Critical Success Factors (CSF)? Outrigger Hotels and Resorts are currently using geographical and product diversification strategy. The firm expend their firm around Pacific Ocean and diversify its product portfolio by adding condominiums resorts and OHANA hotels.
CASE JOURNAL-ROSEWOOD HOTEL& RESORTS Rosewood’s management is on the right track to increasing brand awareness among its customers by pursuing the corporate branding strategy. Implementation of the corporate branding strategy not only increases the number of repeat visitors to the hotels, but also increases the gross profits made by the company by $2,599,000. Corporate branding has a positive impact on the customer lifetime value as well. Rosewood Hotels & Resorts is a privately owned hotel management company that is known for its unique properties like The Carlyle and the Mansion on Turtle Creek that differentiates the company from other luxury hotel competitors.
This goal of the partnerships, mergers and acquisitions will welcome the professionalism in the management of Barclay’s affairs. Through mergers and acquisitions, it will be able to reduce the unfavourable competition and reduce cost of initial set-up that is more expensive than rebranding and acquired firm. Partnerships reduce costs by providing economies of scale. Mergers, on the other hand, reduce risk of venturing into new markets. These engagements allow firms to leverage risk on their combined assets thus lowering the risks associated with doing business.
The hospitality industry is composed of company which focus on customer satisfaction namely, restaurants, retail or accommodation. One particular sector of the hospitality industry is the hotel sector. A hotel is an establishment that provides meals, accommodation and a myriad of services to tourists and travellers such as excursions, spa therapy, business and wedding events. The hotel sector relies wholly on customer satisfaction, disposable income and leisure time. Many other businesses in the hospitality industry are linked with hotels such as, airlines, cruise ships and restaurants.