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Marriott Cost of Capital

The document contains information about the cost of capital for Marriott and other companies in the lodging, restaurants, and contract services industries. It provides the tax rate, equity and debt betas, debt ratios, costs of equity and debt, weighted average cost of capital, and levered betas for Marriott overall and for each of its business segments. The average unlevered beta is highest for contract services at 1.218, while the average WACC is highest for contract services at 14.88% and lowest for lodging at 8.46%.

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78 views3 pages

Marriott Cost of Capital

The document contains information about the cost of capital for Marriott and other companies in the lodging, restaurants, and contract services industries. It provides the tax rate, equity and debt betas, debt ratios, costs of equity and debt, weighted average cost of capital, and levered betas for Marriott overall and for each of its business segments. The average unlevered beta is highest for contract services at 1.218, while the average WACC is highest for contract services at 14.88% and lowest for lodging at 8.46%.

Uploaded by

anmolsaini01
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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Marriott Cost of Capital

Tax Rate 0.44


Equity Beta D/D+E E/D+E D/E Unlevered Beta
Marriott 0.97 41% 59% 0.69 0.70

Lodging
Hilton 0.88 14% 86% 0.16 0.81
Holiday 1.46 79% 21% 3.76 0.47
La Quinta 0.38 69% 31% 2.23 0.17
Ramada 0.95 65% 35% 1.86 0.47
Average 0.92 0.568 0.433 2.00 0.48

Restaurants
Church's 0.75 4% 96% 0.04 0.73
Collins 0.60 10% 90% 0.11 0.56
Frisch's 0.13 6% 94% 0.06 0.13
Luby's 0.64 1% 99% 0.01 0.64
McDonalds 1.00 23% 77% 0.30 0.86
Wendys 1.08 21% 79% 0.27 0.94
Average 0.70 0.108 0.892 0.13 0.64

Contract Services
Assets Assets % Unlevered Betas
Lodging 2777.4 0.606 0.478
Restaurants 567.6 0.124 0.643
Contract Services 1237.7 0.270 1.218
Marriott 4582.7 1.000 0.698

Costs of Equity:
Rf MRP Equity Beta Requity
Marriott 8.95% 7.43% 1.28 18.50%
Lodging 8.95% 7.43% 1.24 18.16%
Restaurants 8.72% 7.43% 0.90 15.43%
Contract Services 8.72% 7.43% 1.67 21.15%

Costs of Debt:
% Floating Floating Rf % Fixed Fixed Rf Spread
Marriott 40% 6.90% 60% 8.95% 1.30%
Lodging 50% 6.90% 50% 8.95% 1.10%
Restaurants 25% 6.90% 75% 8.72% 1.40%
Contract Services 40% 6.90% 60% 8.72% 1.80%
WACCs:
Target B/B+S Rdebt(1-T) S/B+S (target) Requity WACC
Marriott 60% 5.28% 40% 18.50% 10.57%
Lodging 74% 5.05% 26% 18.16% 8.46%
Restaurants 42% 5.41% 58% 15.43% 11.22%
Contract Services 40% 5.48% 60% 21.15% 14.88%
evered Beta Target D/D+E Target D/E Levered Beta
60% 1.50 1.28

74% 2.85 1.24

42% 0.72 0.90

40% 0.67 1.67

Tax rate Rdebt(1-T)


0.44 5.28%
0.44 5.05%
0.44 5.41%
0.44 5.48%

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