Marriott Case Analysis

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| Marriott Corporation:The Cost of Capital | Case Analysis | | | GROUP ONE, LLC 123 Woodward, Detroit, MI, Ph: (313) 570-1000 April 5, 1988 Mr. Dan Cohrs Vice President of Project Finance Marriott Corporation 10400 Fernwood Road Bethesda, MD 20817 Dear Mr. Cohrs, Thank you for selecting Group One, LLC. We have reviewed Marriott’s financial information provided; the company’s planned financial strategy, current market conditions, and overall and financial information on comparable competitors. Based on the information gathered and reviewed we have prepared discount rates for Marriott’s three divisions: Lodging, Contract Services and Restaurants. In addition, per MC’s request Group One has reviewed whether divisional discount rates should be used to determine incentive compensation. Briefly, it is Group One’s recommendation that Marriott use divisional discount rates based on each division’s industry to discount future project cash flows. Also, Group One recommends that MC use discount rates to determine incentive compensation. Attached you will find our report which outlines our assumptions, analysis, calculations, and recommendations. All exhibits and tables referenced in our report may be found on the attached spreadsheet. 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
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