Compute the simple average asset beta of the Marriott's Lodging division's comparable firms listed in Exhibit 3 (i.e. Hilton, Holiday, La Quinta, Ramada)? Round final answer to 2 decimals.

Compute the cost of equity capital for the lodging division using the 30-year treasury (Table A) and the arithmetic average spread between the S&P and long-term government bonds (1926-1987; Exhibit 5) Enter as a percent rounded to two decimals (i.e. X.XX% without the percent sign).

Compute the lodging division's cost of debt capital using the 30 year-treasury 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). (30 year --> 8.95%)

Exhibit 3 Information on Comparable Hotel and Restaurant Companies Arithmetic Geometric Average Average Company and Nature of Business Return Beta Marriott Corporation 22.4% 21.4% (Owns, operates, manages hotels, restaurants, airline and institutional food services) Hilton Hotels Corporation 13.3 12.9 (Owns, manages, licenses hotels, operates casinos) Holiday Corporation 28.8 26.9 1.46 (owns, manages, licenses hotels, restaurants, operates casinos) La Quinta Motor Inns -6.4 -8.6 (Owns, operates, licenses motor inns) Ramada Inns 11.7 2.8 95 (owns, operates hotels, restaurants) Church's Fried Chicken -3.2 7.3 75 (Owns, franchises restaurants, gaming businesses) Collins Foods International 20.3 17.7 (Operates Kentucky Fried Chicken franchise, moderately priced restaurants) Frisch's Restaurants 56.9 49.7 13 (Operates, franchises restaurants) Luby's Cafeterias 15.1 12.8 (Operates cafeterias) McDonald's 22.5 21.3 1.00 (Operates, franchises, services restaurants) Wendy's International 4.6 1.4 1.08 (Operates, franchises, services restaurants) 1987 Market Revenues Leverage billions) 41% $6.52 14 79 1.66 69 17 65 75 10 .23 23 4.89 21 1.05