Case Study/Cost of Capital
...o clear the cost of development from their balance sheet. Earnings per share increased an average of 34% each year between 1978 and 1987, indicating that the chosen project have increased shareholder value. In addition, dividends grew by an average of 23% during the same period. Marriott’s objectives are to “aggressively develop appropriate opportunities within our chosen lines of business – lodging, contract services, and related businesses. In each of these areas our goal is to be the preferred employer, the preferred provider, and the most profitable company”. These objectives seem to incorporate the underlying requirement for any company: to maximize shareholder value. Financial Strategy The four components of Marriott’s financial strategy are: 1. Manage rather than own hotel assets. 2. Invest in projects that increase shareholder value. 3. Optimize the use of debt in capital structure. 4. Repurchase undervalued shares. By developing the hotel properties and selling the physical assets to limited partners while retaining operating control under long-term management contracts, Marriott is able to clear the cost of development from their balance sheet. Earnings per share increased an average of 34% each year between 1978 and 1987, indicating that the chosen project have increased shareholder value. In addition, dividends grew by an average of 23% during the same period. Marriott’s objectives are to “aggressively develop appropriate opportunities within our chosen lines of business – lodging, contract services, and related businesses. In each of these areas our goal is to be the preferred employer, the preferred provider, and the most profitable ...