Beruflich Dokumente
Kultur Dokumente
Cost of Debt :
‘Table A’ showed the financing structure of the Marriott Corporation’s restaurant division. Using the
data from ‘Table A’ & ‘Table B’ , the cost of debt is calculated as follows:
Cost of Equity :
Similar to the calculation of unlevered Beta done for the lodging division, here for restaurant
division the calculation has been performed. The equation is
𝐸𝑞𝑢𝑖𝑡𝑦 𝐵𝑒𝑡𝑎
βU = 𝐷
1+[(1−𝑡)∗ ]
𝐸
The Risk free rate = 3. 54% ; because it’s the average rate for US Govt. treasury bills returns (short Term)
The required data are listed in the following table and using the above formula, we calculated WACC for
restaurant division.
In this case, no information of other companies for contract services is given. The WACC has
been calculated in a different way.
Cost of Debt:
The cost of debt is calculated following the same procedure and information previously done.
Debt Type Weight Rate Weighted Rate
Fixed 60% 8.72% 5.23%
Floating 40% 6.90% 2.76%
Total 7.99%
Premium 1.40%
Cost of Debt 9.39%
The unlevered Beta for Contract Services has been calculated from solving the following equation :
Mariott Beta = (Lodging Asset* Lodging Beta)+ (Contract Services Asset* Contract Services Beta) +
(Restaurant Asset*Restaurant Beta)
The required data are listed in the following table and using the above formula, we calculated WACC for
contract service division.
Target D/V t E/V Cost of Equity Cost of Debt (rD) WACC
(rE)
Contract 40% 0. 44 60% 10.86% 9.39% 8.62%
Services