Case: Marriott Corporation: The Cost of Capital

Case: Marriott Corporation: The Cost of Capital (HBS 9-298-101)

Suggested Questions

1) How will you estimate the cost of equity of an unlisted company having publicly traded comparable companies?

2) Calculate the cost of capital of Marriott Corporation as a whole.

3) Calculate the cost of capital of the lodging business.

4) Calculate the cost of capital of the restaurant business.

5) Calculate the cost of capital of the contract services business.

6) What is the impact of using a single hurdle rate in a company with multiple businesses with varying risk profiles?

Case: Debt Policy at UST Inc. (HBS 9-200-069)

Suggested Questions

1) Why are the Wall Street analysts maintaining a neutral rating on investments in UST Inc?

2) Why is UST Inc. considering a leveraged recapitalization after such a long history of conservative debt policy?

3) Prepare pro-forma income statements for the year 1999 under various assumptions of debt rating. Assume 38% tax rate.

4) Calculate the debt to market equity ratio after USD 1 billion recapitalization.

5) What will be the impact of the recapitalization on future dividend payments?

6) Should UST Inc. undertake the USD 1 billion recapitalization?

Case: Ocean Carriers (HBS 9-202-027)

Suggested Questions

1) Do you expect daily spot hire rates to increase or decrease next year?

2) What factors drive average daily hire rates?

3) How would you characterize the long-term prospects of the capesize dry bulk industry?

4) Should Ms Linn purchase the $39M capesize? Make 2 different assumptions. First, assume that Ocean Carriers is a U.S. firm subject to 35% taxation. Second, assume that Ocean Carriers is located in Hong Kong, where owners of Hong Kong ships are not required to pay any tax on profits made overseas and are also exempted from paying any tax on profit made on cargo uplifted from Hong Kong.

5) What do you think of the company's policy of not operating ships over 15 years old?

Case: Investment Analysis and Lockheed Tri-Star (HBS 9-291-031)

Suggested Questions

Exercise