Marriott International is an American multinational diversified hospitality company that manages and franchises a broad portfolio of hotels and related lodging facilities. Founded by J. Willard Marriott, the company is now led by his son, Executive Chairman Bill Marriott, and President and Chief Executive Officer Arne Sorenson. Headquartered in Bethesda, Maryland, in the Washington, D.C. metropolitan area, Marriott International is the largest hotel chain in the world. It has more than 6,500 properties in 127 countries and territories around the world, over 1.2 million rooms (as of September 2017).

Marriott International has the following capital structure:

Total Debt (liability): $18.2B

Total Preferred Stock: $2.2.B

Total Common stock: $5.6B

Total Liabilities and Shareholders Equity: $26.0B

Marriott is paying the following average costs for its capital:

Debt: 5% (before tax). Assume a tax rate of 21%. Note: to calculate the cost of debt you should do it with the after tax rate.

Preferred stock: 8%

Common Stock: 12%

1. Which is Marriotts Weight Average Cost of Capital (WACC)?

2. Marriott is evaluating opening a new hotel in Downtown Miami, the planned return on the investment will be 9%, should Marriott go ahead with the project or not? Why?