Cost of Capital for Marriott as a whole

Cost and Amount of Debt

Target capital Structure
debt rate premium above govt
30 year fixed US government rate
COST of DEBT for MARRIOTT
tax rate
After Tax cost of Debt

60%
1.30%
8.95%
10.25%
34%
6.77%

The Cost of Equity ( using CAPM)

levered equity beta
target debt ratio
actual debt ratio
asset beta
calculating levered equity beta at 60% debt
risk less rate
risk premium
expected return

0.97
60%
41%
0.57
1.43
8.95%
7.43%
19.58%

WACC

11.89%

Cost of Capital for Lodging

Cost and Amount of Debt

74%
1.10%
8.95%
10.05%
34%

Target capital Structure

debt rate premium above govt
30 year fixed US government rate
COST of DEBT for MARRIOTT
tax rate
After Tax cost of Debt

6.63%

The Cost of Equity ( using CAPM)

target debt ratio
asset beta
calculating levered equity beta at 74% debt
risk less rate
risk premium
expected return

74%
0.41
1.56
8.95%
7.43%
20.56%

WACC

10.25%

Company

Revenues

Hilton
Holiday
La Quinta Motor Inns
Ramada Inns

0.77
1.66
0.17
0.75
3.35

ASSET BETAS for LODGING

Hilton Hotels
Holiday Corp.
La Quinta Motor Inns
Ramada Inns

Equity ratio
0.86

0.21
0.31
0.35

weight

0.23
0.496
0.05
0.224

Levered Equity Beta

Unlevered Asset Beta

0.88
1.46
0.38
0.95

0.76
0.31
0.12
0.33
0.38
0.41

Average unlevered Asset Beta

Weighted Average( by sales) Asset beta