Marriott Lodging Division

Considering Comparable hotels to calculate WACC for Lodging

Market Premium(S& P and long term US Government Bond)
US 30 Year Bond Rate
Debt rate premium

Tax Rate

Hilton Hotels Corporations

Holiday Corporations
La Quinta Motor INNS
Ramada INNS,INC
Average

Target Debt for Lodging

Equity
Target D/E
Levered Beta=Unlevered beta*(1+(1-tax rate)*D/E)
Cost of equity=Risk free rate +Beta*(Rm-Risk free rate)
Cost Of Debt
Weighted Average Cost Of Capital Lodging Division
 7.43%
8.95%
1.10%

0.34
Equity Beta D/D+E E/D+E D/E

0.76 0.14 0.86 0.16

1.35 0.79 0.21 3.76
0.89 0.69 0.31 2.23
1.36 0.65 0.35 1.86
1.09 0.57 0.43 2.00

0.74
0.26
2.85
1.47
19.89%
10.05%
10.08%
Unlevered Beta = Levered Beta/1+(1- Tax rate)*D/E

0.69
0.39
0.36
0.61
0.51
Marriott
Calculating WACC for Marriott division
Market Premium(S& P and long term US Government Bond)
US 30 Year Bond Rate(Risk Free rate)
Tax Rate

Marriott

Debt Rate Premium

Cost Of Debt
Target Debt
Target Equity
Levered Beta=Unlevered beta*(1+(1-tax rate)*D/E)
Cost of Equity =Rf +Levered Beta*(Rm-Rf)

WACC for Marriott division

 7.43
8.95
0.34

Equity Beta D/D+E E/D+E D/E

1.11 0.41 0.59 0.69
1.30
10.25
0.6
0.4
1.51
20.20

12.14
Unlevered Beta = Levered Beta/1+(1- Tax rate)*D/E
0.76
Marriott Restaurant Division
Considering Comparable Restaurants to calculate WACC for Restaurant
Market Premium(S& P and short term US Treasury Bills) 8.47%
US 1 Year Bond Rate 6.90%
debt risk premium 1.80%

Tax Rate 0.34

Equity Beta
Church Fried Chicken 1.45
Collins Foods International 1.45
Frish Restaurants 0.57
Luby's Cafeterials 0.76
McDonald's 0.94
Wendy's International 1.32
Average 1.08
Target Debt for Restaurant 0.42
Equity 0.58
Target D/E 0.72
Levered Beta=Unlevered beta*(1+(1-tax rate)*D/E) 1.47
Cost of equity=Risk free rate +Beta*(Rm-Risk free rate) 19.36%
Cost Of Debt 8.70%
Weighted Average Cost Of Capital Retaurant Division 13.64%
D/D+E E/D+E D/E
0.04 0.96 0.04
0.1 0.9 0.11
0.06 0.94 0.06
0.01 0.99 0.01
0.23 0.77 0.30
0.21 0.79 0.27
0.11 0.89 0.13
Unlevered Beta = Levered Beta/1+(1- Tax rate)*D/E
1.41
1.35
0.55
0.75
0.79
1.12
1.00
Contract Division
US 1 Year Bond Rate

Lodging
Contract Services
Restaurants
Total

u[Marriott]
u[Lodging]
u[Restaurant]
u[Contract]

Target Debt for Contract

Equity
Target D/E
Levered Beta=Unlevered beta*(1+(1-tax rate)*D/E)
Cost of equity=Risk free rate +Beta*(Rm-Risk free rate)
Cost Of Debt
Weighted Average Cost Contract Division
 6.90% Income tax rate 0.34
Identifiable Assets proportion of weights
2777.4 0.61
1237.7 0.27
567.6 0.12
4582.7 1.00

0.76
0.51
1
0.33

0.4
0.6
0.67
0.45
10.70%
8.30%
8.61%
Market Premium(S& P and short term US Treasury Bills) 8.47%