How does marriott use its estimate of its cost of capital? does this make sense?

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25-08-2022
Social Studies

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How does marriott use its estimate of its cost of capital? does this make sense?

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okpalawalter8 okpalawalter8 · Answer 1 · 2022-08-30T18:29:13+02:00

To determine whether or not to invest in a project, Marriott calculates its cost of capital using the weighted average cost of capital (WACC).

Earning a rate of return on the project equal to or greater than the weighted average cost of capital is necessary to both attract and retain investors while also maximizing shareholder value.

This is further explained below.

What is the cost of capital?

Generally, When determining whether or not to invest in a particular project and to estimate its cost of capital, Marriott relies on a metric known as the weighted average cost of capital (WACC).

In conclusion, The needed rate of return is the weighted average cost of capital, and it is the rate of return that we need to earn on the project in order to keep the investors happy and increase the wealth of the shareholders.