Marriot Corporation Cost of Capital

1. Marriott uses its' cost of capital estimates to create a hurdle rate to effectively run operations. Marriott uses these estimates to operate its four financial strategies. These are managing rather then owning hotel assets, investing in projects that increase shareholder value, optimizing the use of debt in the capital structure and repurchasing undervalued shares. If the company uses its overall WACC it may have divisions accept projects with returns below their respective WACC which will …

…beta. The cost of equity is low compared to that of both other divisions continuing my notion that my beta was off and had thrown off my cost of equity. My WACD of 9.39% did not seem to be off so I do not think that it would have affected the WACC negatively. Overall I think that the WACC should have been higher for the contracts division but could not figure out what I did wrong.