Question
Compute the contract services division's cost of debt capital using the 1 year-treasury (Table B) and the credit spread given in Table A. (enter as
Compute the contract services division's cost of debt capital using the 1 year-treasury (Table B) and the credit spread given in Table A. (enter as a percent and round to two decimals (i.e. X.XX%), do not include the % sign).
| Table B U.S. Government Interest Rates, April 1988 | |
| Maturity | Rate |
| 30-year | 8.95% |
| 10-year | 8.72 |
| 1-year | 6.90 |
| Table A Market Value-Target Leverage Ratios and Credit Spreads for Marriott and Its Divisions | ||||
| Debt Percentage in Capital | Fraction of Debt at Floating | Fraction of Debt at Fixed | Debt Rate Premium above Government | |
| Marriott | 60% | 40% | 60% | 1.30% |
| Lodging | 74 | 50 | 50 | 1.10 |
| Contract services | 40 | 40 | 60 | 1.40 |
| Restaurants | 42 | 25 | 75 | 1.80 |
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An Introduction To Real Estate Finance
Authors: Edward Glickman
1st Edition
0123786266, 9780123786265
