Executive Summary B.A.M. is a globally recognized consulting riotous with ties to Asia, the Pacific Northwest USA and the Midwest USA, specializing in recommending capital structures for field of study and international corporations. B.A.M. has successfully assisted several(prenominal) Fortune viosterol companies such(prenominal) as GE, Ford and Bank of the States utilise proper capital structures to make investment and fee decisions which has lead to increased shareholder measure out for our customers. Â soon Marriott offices working just cost of capital (WACC) to determine terminate present value (NPV) of projects. If the WACC rate increase, growth would reduce and if WACC rates were to decrease, growth would accelerate. Marriott as well as uses WACC to determine inducement compensation levels for senior executive management. This is the shape to calculate the WACC. The WACC for Marriott and the give away Divisions are as follows. The on-line(prenominal) WA CC as deliberate by Marriott is 9.29%. B.A.M. consultants calculated the target WACC for Marriott is 10.24%, for the Restaurants Division it is 7.52%, for the deoxidize Services Division it is 17.53% and for the lodgment Services Division it is 8.44%.
We created the followers lawsuits to show how WACC could potentially baffle Marriotts financial decisions: believe Marriott is taking on a project that requires a $100,000 initial investment, which germinates cash inflows of $20,000 per year for 10 years. If we use Marriotts current WACC of 9.29% the project would produce an NPV of $26,730. If we use the Target WACC, 10. 24% for Marriott the NPV would be $21,634. ! decision making based on the assumption of an NPV of $26K but it will really achieve a NPV of $21K. Management will have to let off to shareholders wherefore they were unsuccessful in achieving increased shareholder value. To spot this example further and apply it to a division such as the Contract Services at a 17.53% WACC laughingstock produce a NPV of (-$8,596). In this example Marriott could potentially induce a project,...If you want to get a full essay, high indian lodge it on our website:
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