MARRIOTExhibit 1 Financial History of Marriott Corporation(dollars in millions, except per share amounts)MORE > > > > > >1978197919801981198219831984198519861987Summary of OperationsSales1,174.11,426.01,633.91,905.72,458.92,950.53,524.94,241.75,266.56,522.2Earnings before interestexpense and income taxes107.1133.5150.3173.3205.5247.9297.7371.3420.5489.4Interest Expense23.727.846.852.071.862.861.675.660.390.5Income before income taxes83.5105.6103.5121.3133.7185.1236.1295.7360.2398.9Income taxes35.443.840.645.250.276.7100.8128.3168.5175.9Income from continuing operations48.161.892.976.183.5108.4135.3167.4191.7223.0Net Income54.371.072.086.194.3115.2139.8167.4191.7223.0Funds provided from cont. operations(b)101.2117.5125.8160.8203.6272.7322.5372.3430.3472.8Capitalization and ReturnsTotal Assets1,000.31,080.41,214.31,454.92,062.62,501.42,904.73,663.84,579.35,370.5Total capital(c)826.9891.9977.71,167.51,634.52,007.52,330.72,861.43,561.84,247.8Long-term debt309.9365.3536.6607.7889.31,071.61,115.31,192.31,662.82,498.8Percent to total capital37.5%41.0%54.9%52.1%54.4%53.4%47.9%41.7%46.7%58.8%Sharholders' equity418.7413.5311.5421.7516.0628.2675.6848.5991.0810.8Per Share and Other DataEarnings per share:Continuing operations (a)0.250.340.450.570.610.781.001.241.401.67Net income0.290.390.520.640.690.831.041.241.401.67Cash Dividends0.0260.0340.0420.0510.0630.0760.0930.1130.1360.170Shareholders' equity2.282.582.493.223.894.675.256.487.596.82Market price at year end2.433.486.357.1811.7014.2514.7021.5829.7530.00Shares outstanding (in millions)183.6160.5125.3130.8132.8134.4128.8131.0130.6118.8Return on avg. shareholders' equity13.9%17.0%23.8%23.4%20.0%20.0%22.1%22.1%20.6%22.2%Source: Company Reports(a) The Company's theme park operations were discontinued in 1984(b) Funds provided from continuing operations consist of income from continuing operations plus depreciation,deferred income taxes, and other items not currently affecting workign capital.(c) Total capital represents total assets less current liabilitiesExhibit 2 Financial Summary of Marriott by Business Segment, 1982-1987(dollars in millions)198219831984198519861987Lodging:Sales$1,091.7$1,320.5$1,640.8$1,898.4$2,233.1$2,673.3Operating profit132.6139.7161.2185.8215.7263.9Identifiable assets909.71,264.61,786.32,108.92,236.72,777.4Depreciation22.727.431.332.437.143.9Capital expenditures371.5377.2366.4808.3966.61,241.9Contract Services:Sales819.8950.61,111.31,586.32,236.12,969.0Operating profit51.071.786.8118.6154.9170.6Identifiable assets373.3391.6403.9624.41,070.21,237.7Depreciation22.926.128.940.261.175.3Capital expenditures127.743.855.6125.9448.7112.7Retaurants:Sales547.4679.4707.0757.0797.3879.9Operating profit48.563.879.778.279.182.4Identifiable assets452.2483.0496.7582.6562.3567.6Depreciation25.131.835.534.838.142.1Capital expenditures199.665.072.3128.464.079.6Source: Company ReportsExhibit 3 Information on Comparable Hotel and Restaurant CompaniesAritmetic (a)1987AverageEquity (b)Market (c)RevenuesReturnBetaLeverage($ billions)MARRIOTT CORPORATION22.40%1.1141%6.52(owns, operates, and manages hotels, restaurants,and airline and institutional food services.)Hotels:HILTON HOTELS CORPORATION13.30%0.7614%0.77(owns, manages, and licenses hotels.Operates casinos.)HOLIDAY CORPORATION28.80%1.3579%1.66(Owns, operates, and licenses hotels and restaurants.Operates casinos.)LA QUINTA MOTOR INNS-6.40%0.8969%0.17(Owns, operates, and licenses motor inns.)RAMADA INNS, INC.11.70%1.3665%0.75(Owns and operates hotels and restaurants.)Restaurants:CHURCH'S FRIED CHICKEN-3.20%1.454%0.39(owns and franchises restaurants and gaming businesses.)COLLINS FOODS INTERNATIONAL20.30%1.4510%0.57(Operates Kentucky Fried Chicken franchiseand moderately prices restaurants.)FRISCH'S RESTAURANTS56.90%0.576%0.14(Operates and franchises restaurants.)LUBY'S CAFETERIAS15.10%0.761%0.23(Operates Cafeterias.)MCDONALD'S22.50%0.9423%4.89(Operates, franchises, and services restaurants.)WENDY'S INTERNATIONAL4.60%1.3221%1.05(Operates, franchises, and services restaurants.)Source: Casewriter estimates.(a) Calculated over the five-year priod of 1983-1987(b) Estimated using five years of monthly data over the 1983-1987 period by ordinary least squares(c) Book value of debt divided by the sum of the book value of debt plus the market value of equity.Exhibit 4 Annual Holding-Period Returns for Selected Securitiesand market Indexes, 1926-1987ArimethicStandardYearsAverageDeviationShort-term Treasury bills:1926-873.54%0.94%1926-501.01%0.40%1951-753.67%0.56%1976-807.80%0.83%1981-8510.32%0.75%19866.16%0.19%19875.46%0.22%Long-term U.S. Government bonds returns:1926-874.58%7.58%1926-504.14%4.17%1951-752.39%6.45%1976-801.95%11.15%1981-8517.85%14.26%198624.44%17.30%1987-2.69%10.28%Long-term, high-grade corporate bond returns:1926-875.24%6.97%1926-504.82%3.45%1951-753.05%6.04%1976-802.70%10.87%1981-8518.96%14.17%198619.85%8.19%1987-0.27%9.64%Standard and Poor's 500 Composit Stock Index returns:1926-8712.01%20.55%1926-5010.90%27.18%1951-7511.87%13.57%1976-8014.81%14.60%1981-8515.49%13.92%198618.47%17.94%19875.23%30.50%Source: Casewriter estimates based on data from the University ofChicago's Center for Research in Security Prices.Exhibit 5 Spreads between S&P 500 Composite Returns and Bond RatesArimethicStandardYearsAverageDeviationSpread between S&P 500 Compsoite returnsand short-term U.S. Treasury bill returns:1926-878.47%20.60%1926-509.89%27.18%1951-758.20%13.71%1976-807.01%14.60%1981-855.17%14.15%198612.31%17.92%1987-0.23%30.61%Spread between S&P 500 Compsoite returnsand long-term U.S. Government bond returns:1926-877.43%20.78%1926-506.76%26.94%1951-759.48%14.35%1976-8012.86%15.58%1981-85-2.36%13.70%1986-5.97%14.76%19877.92%35.35%Spread between S&P 500 Compsoite returnsand long-term high-grade corporate bond returns:1926-876.77%20.31%1926-506.06%26.70%1951-758.82%13.15%1976-8012.11%15.84%1981-85-3.47%13.59%1986-1.38%14.72%19875.50%34.06%Source: Casewriter estimates based on data from the University ofChicago's Center for Research in Security Prices.Marriott Corporation: The Cost of Capital (Abridged)Harvard Business SchoolCase Software 2-293-753Copyright (c) 1993 by the President and Fellows of Harvard College.Professor Richard S. Ruback prepared this case as a basis for class discussionrather than to illustrate either effective or ineffective handling of an administrative situationSCROLL DOWN FOR LIST OF EXHIBITS...WORKSHEET NAVIGATIONThis worksheet contains the data from the following exhibits:Exhibit 1:Financial History of Marriott CorporationExhibit 2:Financial Summary of Marriott by Business Segment, 1982-1987Exhibit 3:Information on Comparable Hotel and Restaurant CompaniesExhibit 4:Exhibit 4 Annual Holding-Period Returns for Selected Securitiesand market Indexes, 1926-1987Exhibit 5:Spreads between S&P 500 Composite Returns and Bond RatesThe first exhibit is located in the A1 position.To view each succeeding exhibit, use the SCROLL Bar to view the next exhibitOPTIONAL NAVIGATIONAL TECHNIQUEEach exhibit in this worksheet has been named using the commands in Excel. This allows you to easily movefrom one section of the worksheet to another. Either of the followingtechniques will allow you to move from one exhibit to another.Click on in the menu bar, then select from pulldown menuA dialog box will appear listing the exhibitsClick on the exhibit you wish to view, then click on .ORYou may use the scroll bar or arrow keys to page down through the listof exhibits if the one you wish to view is not immediately apparent.SCROLL TO A1 TO GO TO FIRST EXHIBIT...

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