1.Since the Marriott Corporation began in 1927, the business grew into one of the leading lodging and food service companies in the United States. From the Exhibit 1, the sales grew 455% ($1174.1 to $6522.20) from 1978 to 1987. The Return on average shareholders’ equity grew to 22.2% from 13.9%. The company’s growth objective is to remain a premier growth company. The four components of Marriott’s financial strategy are consistent with its growth objective. Firstly, manage rather than own hotel assets saved lots of costs and reduced its debt. While retaining operating control, Marriott generated $890 million revenue and the management cost is only 3% of the revenues. Second, invest in projects that increase shareholder value benefits the company by using discounted cash flow techniques to evaluate potential investments. It considered present time value and the company can ensure a return on projects which results in profitable and competitive advantage. Third, optimize the use of debt in the capital structure is achieved by invests money in long term assets. It can maximize its debt. Finally, to repurchase undervalued shares once its stock market price fell substantially below that value generate $429 million stocks by only using $13.6 million. All of these four strategy is crucial to keep the company’s growth.

2.Marriott use WACC to estimate its cost of capital. Weighted average cost of capital is used to calculate a firm’s cost of capital in which each category of capital is proportionately weighted. This approach required knowing the specific costs of debt and equity, as capital structure changes. All of the three factors are provided so it is appropriate to estimate the cost of capital.

3.To calculate the WACC of capital, it needs to find out the cost of debt and the cost of equity. Cost of equity equals to the risk-free rate plus beta times the risk