279159958.

xls

Exhibit 1 Financial History of Marriott Corporation

(dollars in millions, except per share amounts)

1978

1979

1980

1981

Summary of Operations
Sales
Earnings before interest
expense and income taxes
Interest Expense
Income before income taxes
Income taxes
Income from continuing operations
Net Income
Funds provided from cont. operations

1,174.1

1,426.0

1,633.9

1,905.7

107.1
23.7
83.5
35.4
48.1
54.3
101.2

133.5
27.8
105.6
43.8
61.8
71.0
117.5

150.3
46.8
103.5
40.6
92.9
72.0
125.8

173.3
52.0
121.3
45.2
76.1
86.1
160.8

1,000.3
826.9
309.9
37.5%
418.7

1,080.4
891.9
365.3
41.0%
413.5

1,214.3
977.7
536.6
54.9%
311.5

1,454.9
1,167.5
607.7
52.1%
421.7

0.25
0.29
0.026
2.28
2.43
183.6
13.9%

0.34
0.39
0.034
2.58
3.48
160.5
17.0%

0.45
0.52
0.042
2.49
6.35
125.3
23.8%

0.57
0.64
0.051
3.22
7.18
130.8
23.4%

Capitalization and Returns

Total Assets
Total capital(c)
Long-term debt
Percent to total capital
Sharholders' equity
Per Share and Other Data
Earnings per share:
Continuing operations (a)
Net income
Cash Dividends
Shareholders' equity
Market price at year end
Shares outstanding (in millions)
Return on avg. shareholders' equity

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 depreciat
deferred income taxes, and other items not currently affecting workign capital.
(c) Total capital represents total assets less current liabilities

Exhibit 2 Financial Summary of Marriott by Business Segment, 1982-1987

(dollars in millions)

Lodging:
Sales

1982

1983

1984

1985

1986

$1,091.7

$1,320.5

$1,640.8

$1,898.4

$2,233.1

Page 1

279159958.xls
Operating profit
Identifiable assets
Depreciation
Capital expenditures

132.6
909.7
22.7
371.5

139.7
1,264.6
27.4
377.2

161.2
1,786.3
31.3
366.4

185.8
2,108.9
32.4
808.3

215.7
2,236.7
37.1
966.6

Contract Services:
Sales
Operating profit
Identifiable assets
Depreciation
Capital expenditures

819.8
51.0
373.3
22.9
127.7

950.6
71.7
391.6
26.1
43.8

1,111.3
86.8
403.9
28.9
55.6

1,586.3
118.6
624.4
40.2
125.9

2,236.1
154.9
1,070.2
61.1
448.7

Retaurants:
Sales
Operating profit
Identifiable assets
Depreciation
Capital expenditures

547.4
48.5
452.2
25.1
199.6

679.4
63.8
483.0
31.8
65.0

707.0
79.7
496.7
35.5
72.3

757.0
78.2
582.6
34.8
128.4

797.3
79.1
562.3
38.1
64.0

Source: Company Reports

Exhibit 3

Information on Comparable Hotel and Restaurant Companies

MARRIOTT CORPORATION

Aritmetic (a)
Average
Return

Equity (b)
Beta

Market (c)
Leverage

22.40%

1.11

41%

13.30%

0.76

14%

28.80%

1.35

79%

-6.40%

0.89

69%

11.70%

1.36

65%

(owns, operates, and manages hotels, restaurants,

and airline and institutional food services.)

Hotels:
HILTON HOTELS CORPORATION
(owns, manages, and licenses hotels.
Operates casinos.)

HOLIDAY CORPORATION
(Owns, operates, and licenses hotels and restaurants.
Operates casinos.)

LA QUINTA MOTOR INNS

(Owns, operates, and licenses motor inns.)

RAMADA INNS, INC.

(Owns and operates hotels and restaurants.)

Page 2

279159958.xls

Restaurants:
CHURCH'S FRIED CHICKEN

-3.20%

1.45

4%

20.30%

1.45

10%

56.90%

0.57

6%

15.10%

0.76

1%

22.50%

0.94

23%

4.60%

1.32

21%

(owns and franchises restaurants and gaming businesses.)

COLLINS FOODS INTERNATIONAL

(Operates Kentucky Fried Chicken franchise
and moderately prices restaurants.)

FRISCH'S RESTAURANTS
(Operates and franchises restaurants.)

LUBY'S CAFETERIAS
(Operates Cafeterias.)

MCDONALD'S
(Operates, franchises, and services restaurants.)

WENDY'S INTERNATIONAL
(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 Securities

and market Indexes, 1926-1987

Arimethic
Average

Years

Standard
Deviation

Short-term Treasury bills:

1926-87
1926-50
1951-75
1976-80
1981-85
1986
1987

3.54%
1.01%
3.67%
7.80%
10.32%
6.16%
5.46%

0.94%
0.40%
0.56%
0.83%
0.75%
0.19%
0.22%

4.58%
4.14%
2.39%

7.58%
4.17%
6.45%

Long-term U.S. Government bonds returns:

1926-87
1926-50
1951-75

Page 3

279159958.xls
1976-80
1981-85
1986
1987

1.95%
17.85%
24.44%
-2.69%

11.15%
14.26%
17.30%
10.28%

Long-term, high-grade corporate bond returns:

1926-87
1926-50
1951-75
1976-80
1981-85
1986
1987

5.24%
4.82%
3.05%
2.70%
18.96%
19.85%
-0.27%

6.97%
3.45%
6.04%
10.87%
14.17%
8.19%
9.64%

Standard and Poor's 500 Composit Stock Index returns:

1926-87
1926-50
1951-75
1976-80
1981-85
1986
1987

12.01%
10.90%
11.87%
14.81%
15.49%
18.47%
5.23%

20.55%
27.18%
13.57%
14.60%
13.92%
17.94%
30.50%

Source: Casewriter estimates based on data from the University of

Chicago's Center for Research in Security Prices.

Exhibit 5

Spreads between S&P 500 Composite Returns and Bond Rates

Arimethic
Average

Years

Standard
Deviation

Spread between S&P 500 Compsoite returns

and short-term U.S. Treasury bill returns:
1926-87
1926-50
1951-75
1976-80
1981-85
1986
1987

8.47%
9.89%
8.20%
7.01%
5.17%
12.31%
-0.23%

Spread between S&P 500 Compsoite returns

and long-term U.S. Government bond returns:

Page 4

20.60%
27.18%
13.71%
14.60%
14.15%
17.92%
30.61%

279159958.xls

1926-87
1926-50
1951-75
1976-80
1981-85
1986
1987

7.43%
6.76%
9.48%
12.86%
-2.36%
-5.97%
7.92%

20.78%
26.94%
14.35%
15.58%
13.70%
14.76%
35.35%

Spread between S&P 500 Compsoite returns

and long-term high-grade corporate bond returns:
1926-87
1926-50
1951-75
1976-80
1981-85
1986
1987

6.77%
6.06%
8.82%
12.11%
-3.47%
-1.38%
5.50%

20.31%
26.70%
13.15%
15.84%
13.59%
14.72%
34.06%

Source: Casewriter estimates based on data from the University of

Chicago's Center for Research in Security Prices.

Marriott Corporation: The Cost of Capital (Abridged)

Harvard Business School
Case Software 2-293-753
Copyright (c) 1993 by the President and Fellows of Harvard College.

Professor Richard S. Ruback prepared this case as a basis for class discussion
rather than to illustrate either effective or ineffective handling of an administrative situation

SCROLL DOWN FOR LIST OF EXHIBITS...

WORKSHEET NAVIGATION
This worksheet contains the data from the following exhibits:
Exhibit 1: Financial History of Marriott Corporation

Page 5

279159958.xls
Exhibit 2: Financial Summary of Marriott by Business Segment, 1982-1987
Exhibit 3: Information on Comparable Hotel and Restaurant Companies
Exhibit 4: Exhibit 4 Annual Holding-Period Returns for Selected Securities
and market Indexes, 1926-1987
Exhibit 5: Spreads between S&P 500 Composite Returns and Bond Rates
The first exhibit is located in the A1 position.
To view each succeeding exhibit, use the SCROLL Bar to view the next exhibit

OPTIONAL NAVIGATIONAL TECHNIQUE

Each exhibit in this worksheet has been named using the <Formula>
<Define> <Name> commands in Excel. This allows you to easily move
from one section of the worksheet to another. Either of the following
techniques will allow you to move from one exhibit to another.
Click on <Formula> in the menu bar, then select <Go to...> from pulldown menu
A dialog box will appear listing the exhibits
Click on the exhibit you wish to view, then click on <OK>.
OR
You may use the scroll bar or arrow keys to page down through the list
of exhibits if the one you wish to view is not immediately apparent.
SCROLL TO A1 TO GO TO FIRST EXHIBIT...

Page 6

279159958.xls

MORE > > > > > >

1982

1983

1984

1985

1986

1987

2,458.9

2,950.5

3,524.9

4,241.7

5,266.5

6,522.2

205.5
71.8
133.7
50.2
83.5
94.3
203.6

247.9
62.8
185.1
76.7
108.4
115.2
272.7

297.7
61.6
236.1
100.8
135.3
139.8
322.5

371.3
75.6
295.7
128.3
167.4
167.4
372.3

420.5
60.3
360.2
168.5
191.7
191.7
430.3

489.4
90.5
398.9
175.9
223.0
223.0
472.8

2,062.6
1,634.5
889.3
54.4%
516.0

2,501.4
2,007.5
1,071.6
53.4%
628.2

2,904.7
2,330.7
1,115.3
47.9%
675.6

3,663.8
2,861.4
1,192.3
41.7%
848.5

4,579.3
3,561.8
1,662.8
46.7%
991.0

5,370.5
4,247.8
2,498.8
58.8%
810.8

0.61
0.69
0.063
3.89
11.70
132.8
20.0%

0.78
0.83
0.076
4.67
14.25
134.4
20.0%

1.00
1.04
0.093
5.25
14.70
128.8
22.1%

1.24
1.24
0.113
6.48
21.58
131.0
22.1%

1.40
1.40
0.136
7.59
29.75
130.6
20.6%

1.67
1.67
0.170
6.82
30.00
118.8
22.2%

erations plus depreciation,

1987
$2,673.3

Page 7

279159958.xls
263.9
2,777.4
43.9
1,241.9

2,969.0
170.6
1,237.7
75.3
112.7

879.9
82.4
567.6
42.1
79.6

1987
Revenues
($ billions)
6.52

0.77

1.66

0.17

0.75

Page 8

279159958.xls

0.39

0.57

0.14

0.23

4.89

1.05

ry least squares
value of equity.

Page 9

279159958.xls

Page 10

279159958.xls

EXHIBITS...

Page 11

279159958.xls

Page 12