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Please read the files that I attached, I need you to answer the questions in the file and upload them. also, upload the Excel file which includes your analysis and calculations then do PowerPoint so I can do the presentation in class for the case. Please do not accept the case if you can not solve it.
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Assume that Marriott Corp. has a 40% marginal tax rate and that all the other hotels in this case
are also subject to a 40% marginal tax rate. All the restaurants in this case are also subject to a 40%
marginal tax rate.
1. What is the Unlevered beta for the stock of the Marriott Corporation? Clearly label dollar values for
debt and equity when calculating the Unlevered beta. (5 pts.)
2. What is the Levered beta for Marriott Corporation’s stock using Marriott target ratios? (5 pts.)
3. On the lines below write in the name of each “pure play” firm that you selected to represent Marriott’s
lodging division. Next to each of your selections calculate the “pure play’s” Unlevered beta. (10 pts)
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4. What is the average Unlevered betas of your pure play firms? (0 pts.)
5. Using the average Unlevered beta for the firms that you used in problem 4, calculate the average
Levered beta that should be used for Marriott’s lodging division. (10 pts)
Ave. levered beta =
6. Here you will calculate the return that would be required by the lodging divisions stockholders if they
had stock. To solve this you should use a popular equation (formula).
a. What is the first risk free rate(s) in your equation when calculating the return that stockholders
would require? Explain (5 pts)
b. What is the beta in your equation to calculate this return? (0 pts)
c. What is the market risk premium in your equation that is needed to calculate the return?
What numbers should you use to get this market risk premium? (5 pts)
7. What is the cost of debt for the lodging division of Marriott? How did you calculate this
rate? (5 pts)
8. What is the overall cost of capital for the Lodging division of Marriott? Explain each
variable use. (10 pts)
9. On the lines below write in the name of each “pure play” firm that you selected to represent Marriott’s
restaurant division. Next to each of your selections calculate their Unlevered beta. (5 pts)
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_______________
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_______________
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_______________
10. What is the average unlevered beta for the pure play firms you selected? (0 pts)
11. Using the average Unlevered beta for the firms that you used in problem 10, calculate the average
Levered beta that should be used for Marriott’s restaurant division. (5 pts)
Ave. Beta =
12. Here you will calculate the return that would be required by the restaurant division’s stockholders if
they had stock. To solve this you should use a popular equation (formula).
a. What is the first risk free rate(s) in your equation when calculating the return that stockholders
would require? Explain (5 pts)
b. What is the beta in your equation to calculate the return? (0 pts.)
c. What is the market risk premium in your equation to calculate the return? What numbers
should you use to get this number? (5 pts)
13. What is the equity return that would be required on any investments that the restaurant division
makes? (5 pts)
14. What is the cost of debt for the restaurant division of Marriott? How did you calculate this rate?
(5 pts)
15. What is the overall cost of capital for the restaurant division of Marriott? Explain each variable
used. (5 pts)
16. You need to calculate the weight average cost of capital for the Service Division. There are no pure
plays for this division!
A. Let me help you with this calculation. First you need to calculate below the unlevered
beta for the Service division. You will need an equation to solve for the beta. Next use that
unlevered beta to calculate the levered beta for the Service division. Explain why you
selected the numbers you used in your equation. You should be able to solve for the
Service Division beta from this equation. (5 pts)
16. Now you should be able to calculate the WACC?
Division. Show this calculation. (5 pts)
What is the WACC for the Service
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