Marriot Corporation: The Cost Of Capital

Equity Beta 1.11

Debt Ratio 60%
Equity Ratio 40%
Tax 34%
Asset Beta 0.666
Re-levered BL 1.598
Lodging Division Tax 0%
Hotels Levered (equity) Beta Market Leverage D/E Ratio Unlevered Beta
Hilton 0.76 14% 0.163 0.654
Holiday Corp 1.35 79% 3.762 0.284
La Quita Motor 0.89 69% 2.226 0.276
Ramada Inn 1.36 65% 1.857 0.476
Age. Un-levered (asset) Beta 0.422
Debt Ratio 74%
Equity Ratio 26%
Re-levered BL 1.624
Retaurant Division Tax 0%
Hotels Levered (equity) Beta Market Leverage D/E Ratio Unlevered Beta
Church Fried Chicken 1.45 4% 0.042 1.392
Collins Foods 1.45 10% 0.111 1.305
Frisch Restaurant 0.57 6% 0.064 0.536
Luby Cafeterias 0.76 1% 0.010 0.752
Mcdonalds 0.94 23% 0.299 0.724
Wendy's Int 1.32 21% 0.266 1.043
Avg. Un-levered (asset) Beta 0.959
Debt Ratio 42%
Equity Ratio 58%
Re-levered BL 1.653
Marriot Lodging Restaurant Contract Services
Risk free Rate 8.95% 8.95% 6.90% 6.90%
Spread 1.30% 1.10% 1.80% 1.40%

Pre Tax Kd 10.25% 10.05% 8.70% 8.30%

Tax 34% 34% 34% 34%
Post Tax Kd 6.77% 6.63% 5.74% 5.48%
Beta 1.598 1.624 1.653 1.553
Risk Premium 7.43% 7.43% 8.47% 8.47%
Ke 20.83% 21.02% 20.90% 20.06%
Debt Ratio 60% 74% 42% 40%
Equity Ratio 40% 26% 58% 60%
WACC 12.39% 10.37% 14.53% 14.23%
Divisions Identified Assets Ratio Un-levered Beta
Lodging 2777.4 0.61 0.422
Restaurant 567.6 0.12 0.959
Contract Services 1237.7 0.27 1.0788
4582.7 1 0.666
Equity Beta 1.0788
Debt Ratio 40%
Equity Ratio 60%
Tax 34%
Re-levered BL 1.553