Marriott Cost Of Capital
QUESTION 1 – Why does Marriott Corp need to set up new hurdle rates for its businesses?
The need to set up new hurdle rates for its businesses derives from the fact that the risk level of a project is not static as it is influenced by several variables such as interest rates, geopolitical conditions, cyclical period of the economies, competition and others. If we look, for example, at government bond interest rates which influence the risk free rate used in the projects equity cost calculations we can easily understand this as a drop or a rise in these rates will clearly have positive or negative impact on the projects hurdle rate, respectively.
Geopolitical conditions are also of importance as they influence the investor's aversion to risk and this is reflected on interest rates.
Competition is also an important variable in this equation: imagine a situation where competition increases dramatically in the business of the company, in this case Marriott Corp, and due to this......
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