Marriott Wacc Case

Marriott Corporation: Cost of Capital Case

1. For what purposes does Marriott use its address of gravid estimate?  Does this make sense?

The Marriott Corporation uses their cost of groovy estimate as their vault rate to determine which investment funds opportunities should be accepted or rejected.  By requiring any(prenominal) potential difference projects meet the divisions respective vault rate, the companion ensures that their investments will bugger off high enough returns to compensate for any risks that must be undertaken.  In addition to using the cost of cap as the hurdle rate, Marriott is considering using the cost of capital to determine inventive compensation.  In other words, it was proposed that employees receive bonuses ground on their divisions return on assets compared to the hurdle rate.

It is appropriate to use the cost of capital as a hurdle rate in determining which projects should be pursued.  It is archetype practice for companies to discount future cash flows at a predetermined discount rate to determine whether or not the company will be profitable.

However, using performance compared to hurdle rates would be somewhat challenging in that managers would have an incentive to underestimate a projects align cost of capital in order to consistently stun their estimates.  

2.



What is the weighted average cost of capital for Marriott Corporation as a whole?  What type of investments would you value using this WACC?

This WACC eyeshade is the opportunity cost of capital for the Marriott Corporation as a whole. Investments in Lodging, Contract services, or Restaurants would all use their protest WACC measures and not that of the whole corporation.
3. If Marriott used a wiz integrated hurdle rate for evaluating investment opportunities in each of its lines of business, what would keep to the company over time?

If Marriott used a single hurdle rate for all lines of business, they would ignore the importance of coordinated required returns with risk levels across...If you want to get a expert essay, order it on our website: Orderessay



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