1. Many firms compute a "hurdle rate" they use to assess investment projects as follows:
   2. use a risk-return model, like the CAPM, to determine the "technical" discount rate required given the risk of the average project.
   4. add a "profit margin" (say 2%) above this technical discount rate - this 2% buffer is supposed to be a margin of error and an aspiration to earn substantial returns for shareholders, rather than just earn the minimum.

Discuss briefly what you think about this practice. Be clear and concise and to the point.

2. Marriott uses the WACC to compute its hurdle rate to use for investment decisions. Marriott has several divisions, one of which is "restaurants". Explain whether Marriott, when investing in a new restaurant, should use its corporate risk/cost-of-capital parameters (beta, cost of debt) or whether it should use restaurant industry parameters. You should assume that Marriott is raising capital only at the corporate level and not division-by-division.
4. Look at the WACC formula below. If you were in charge, how might you try and reduce the WACC for Marriott (which driver of the WACC would you focus on)? Can you even do it? If you had to estimate, how would you compute the impact that this reduction would have on the shareholder value of the firm?