Marriot

Marriott Corporation: The Cost of Capital Case Assignment 4a. The put on the line supererogatory stride we used is 8.95% for live and 8.72% for the eatery division. These positions were hypothesis 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 twain divisions. We inhabit the lodging division to have long liveliness assets that may likely last around 30 years. And we rely the assets for restaurant may last closer to 10 years. The chance subvention rate we used is 7.43% for lodging division and 8.47% for the restaurant division. These amount pool were provided in Exhibit 5 of the case. 7.43% was the pervade surrounded by the S&P vitamin D and long-run government bonds and 8.47% was the spread between the S&P 500 and short-run government bonds. ilk the risk 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 mingle rate made up of a floating(a) rate and a headstrong rate. For the speak to of debt in the lodging division, we reckon 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 f! ull essay, coordinate it on our website: BestEssayCheap.com

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