Marriott Case Study - 2572 Words

1. Are the four components of Marriott’s Financial Strategy consistent with its growth objective? Marriotts sales grew up by 24% and its return on equity stood at 22% in the year 1987, the sales and earnings per share has doubled over the previous year as stated in the case study. The company operates in three divisions: lodging, contract services and restaurants which represents 41%, 46% and 13% of sales in 1987 respectively. Marriott is determined to develop and to enhance its position in each division and remain a premier growth company as stated in the annual report (1987). This key objective implies to become the most profitable company, be the preferred provider as well as preferred employer. Analysis the four key elements of†¦show more content†¦The risk free rate used is 4.27% which is the long term US Government bond returns, 1926- 1987. The reason of choosing 4.27% is the underlying assumption that since Marriott is involved in hotel and related operation it will use the long term rate for the company as a whole in the financial risk rate. in addition, I decided to select the rate covering the period 1926- 1987 as this period is long enough to consider various phases of economic and business life cycle that took place during the period like depression, recessions, inflationary tendencies, world war, etc. b) Risk Premium used and justification for its use Risk Premium = Market Return(Rm) – Risk Free Rate (Rf) = 9.90%- 4.27% = 5.63% Referring to the assumption in part A above, that Risk Free Rate is obtained from long term US Government bond return (i.e 4.27%), we have to determine the Market Return Rate. Market return is obtained from Exhibit 4, SP 500 Composite Stock Index Returns of 1926 – 1987 which was 9.90%. the assumption of selecting the returns covering the period 1926- 1987 as this period is long enough to consider various phases of economic and business life cycle that took place during the period and will match the risk free rate under the period of consideration (1926 – 1987) c. Marriot cost of debt Rd Rd = interest rate + Risk premium Where, the risk premium for Marriot can beShow MoreRelatedMarriott Case Study1995 Words   |  8 PagesMarriott Bedding Program CASE STUDY Marriott Bedding Program Marriott International Uses Project Management to Upgrade Bedding Worldwide Headquartered in Washington, DC, Marriott International, Inc. is one of the leading hospitality companies in the world with more than 2,400 properties in 68 countries and territories. As a management company, Marriott is responsible for daily operations in both company-operated and franchised properties. 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