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Company Goals
Its growth objective is to remain a
premier growth company by:
a. Aggressively developing appropriate
opportunities within existing line of
business
Problem
To find out suitable Hurdle Rate to be
used as a discount rate for cash
inflows, to evaluate various projects
that Marriott Corpaoration may
undertake in the future.
Financial Strategy
Hurdle Rate is the minimum rate of
return that must be met for a
company to undertake a particular
project.
Selection of investment project by
discounting expected cash flow at
hurdle rate for each division.
Marriott use the Weighted-Average-Cost of Capital (WACC) method to measure the opportunity
cost for investments
WACC = (1- Tax Rate) x Cost of Debt x _D _
E+D
+ Cost of Equity x
E+D
E_
All WACC calculations are based on target values for Debt and Equity
Leveraged 's have been used for WACC calculations
ALTERNATIVE COURSES OF
ACTION: ANALYSIS
ACA 1
ACA 2
ACA 3
Do nothing