Marriot

Marriott Corporation: The Cost of Capital Case Assignment 4a. The pretend supererogatory stride we used is 8.95% for lodgment and 8.72% for the eatery division. These tramps were confidence in Table B of the case. We used 8.95% for lodging which equates to the maturity date of a 30-year giving medication bond and 8.72% was the rate for a 10-year government bond. We chose those two rates because it matched the continuance of the assets in two divisions. We inhabit the lodging division to have long livelihood assets that may likely last around 30 years. And we retrieve the assets for eating house may last closer to 10 years. The peril subvention rate we used is 7.43% for lodging division and 8.47% for the restaurant division. These number pool were provided in Exhibit 5 of the case. 7.43% was the interruption surrounded by the S&P euchre and long government bonds and 8.47% was the spread between the S&P 500 and short-run government bonds. ilk the r isk free rate, these numbers were chosen to match the duration of the assets. 4b.

Cost of debt Both the lodging and restaurant divisions debt used a immingle rate made up of a travel(a) rate and a headstrong rate. For the speak to of debt in the lodging division, we calculate 50% of the debt by the floating rate and added that to the remaining 50%, which was multiplied by the fixed rate. Consistent with the definition that a floating rate is an adaptable short-term saki rate, our floating rate was determined by adding the given debt rate premium of 1.10% to the short-term (1-year) government interest rate of 6.90%, giving us a floating rate of 8%.If you want to get a full essay , coordinate it on our website: OrderEssay.net

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