What is the after-tax cost of debt if the tax rate is 34%? (5 pts) c. Explain what other methods you could have used to find the cost of debt for AirJet Best Parts Inc.(10 pts) d. Explain why you should use the YTM and not the coupon rate as the required return for debt. (5 pts) 2. Compute the cost of common equity using the CAPM model. For beta, use the average beta of three selected competitors.
What factors should be considered in electing the tax year? DQ 2 What is the legislative intent behind the corporate alternative minimum tax (AMT)? Define tax reference items, AMT adjustment, and minimum tax credit Week 3 Learning Team Week Three Problem Set Complete the problems found in Ch. 3 & 5 of Prentice Hall’s Federal Taxation 2010: Corporations with your Learning Team. C:3-3 Discussion Question – Case Scenario on Tax Elections (Ch.
Distinguish among operating, investing, and financing activities. Managers’ activities and responsibilities can be classified into three broad functions. List and discuss each function. Identify and discuss the relevant costs in accepting an order at a special price Smith & Company claims that the relevant range concept is only important for variable costs. Explain the relevant range concept and discuss whether you agree with Smith & Company.
QUESTIONS 1. Table 1 contains the complete cash flow analysis based on GP Manufacturing’s basic information. Explain the inputs into 1) the net initial investment outlay at year 0, 2) the depreciation tax savings in each year of the project’s economic life, and 3) the project’s incremental cash flows? 1. Net initial investment outlay is $302,040.
2. The Wall Street Journal (WSJ) lists the current price of James River common stock at $27.00. a. Based on this information, the ValueLine 1995 expected dividend, and the annual rate of dividend change for the growth estimate, what is the company’s return on common stock using the constant growth model? What is the expected dividend yield and expected capital gains yield?
Marriott Corporation has three major business divisions: Lodging, which included over 360 hotels (as of 1987) and generated 41% of sales and 51% of profits; Contract Services, that provides catering and food services to institutions and corporations, and generated 46% of sales and 33% of profits; and Restaurants, that generated 13% of sales and 16% of profits. Marriott has four key elements of their financial strategy: Manage rather than own hotel assets; Invest in projects that increase shareholder value; Optimize the use of debt in the capital structure; and Repurchase undervalued shares. The company uses discounted cash flow techniques and assigns hurdle rates to new projects to evaluate potential investments, determine the “warranted equity value” for its common shares, and even determine incentive compensation for its employees. In order to invest only in projects that increase shareholder value, Marriott uses the CAMP model to estimate the cost of equity, or the shareholders expected return for equity, for each new project, based on which division the investment would be in. They then develop target leverage ratios and use the WACC to determine the cost of capital for the whole corporation as well as each of the three divisions.
Question: : (TCO D) A company issues $5,000,000, 7.8/%, 20-year bonds to yield 8% on January 1, 2010. Interest is paid on December 31. The proceeds from the bonds are $4,901,036. Using effective-interest amortization, how much interest expense will be recognized in 2010? 15.
Please refer to tab labeled “Calculations and Tables” for details of the calculations used and the Tables noted in our report. Should you have any questions or concerns, please do not hesitate to contact us. Respectfully Submitted, Group One, LLC Background and Problem Statement Marriott Corporation (MC) was started in 1927 and is currently a multibillion dollar business involving hotels, contract services and restaurants. MC manages hotels that range from moderately priced (Fairfield Inn) to high quality (Marriott hotels). Contract services provide food and management services as well as
JULIO OLAGUE MARRIOTT CORPORATION: The Cost of Capital (Abridged) March 25th, 2015 Company Description Marriot Corporation is a major competitor in the lodging and food service industry in the United States. Its three major lines of business are lodging, which includes 361 hotels, contact services, which provides food and service management to institutions and airline catering through its InFlite services, and restaurants, which includes Bob’s Big Boy, Roy Rogers, and Hot Shoppes. Key Points (Changes to the WACC) Marriott’s WACC: Lodging WACC: Contract services WACC: Restaurants WACC: 8.57% 10.24% 7.55% 10.68% Recommendation Marriott Corporation should use a different weighted average cost of capital (WACC) for each division in order for projects to be valuated correctly. Share repurchases should only be done when there is excess cash to both, buy back the shares, and to fund future investment projects. EXECUTIVE SUMMARY Based on our weighted average cost of capital calculation (WACC) we determined that Marriott Corporation should use a different hurdle rate for each of its three divisions, as well as for the entire firm.
Marriott Corporation: the cost of capital Main focus of the case is to discuss about the approach of calculating hurdle rates and impact of hurdle rate on firm’s financial and operating strategies. Case provides details about the business model comprising of three visions of company and financial strategy of the company. It also provides the financial information of corporation and of each business segment for last few years. Most Importantly, Case includes the key elements of financial strategy and managers’ decisions have the potential of impacting financial strategy in following ways:- Share Repurchasing Buyback of Shares demonstrates the commitment and confidence of decision makers in the organization business model and competencies. However buyback includes discretion at the end of managers and can be used to create false demand in market.