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CORPORATION
B.B.Chakrabarti
IIM Calcutta
August 2005
The Issue
Calculation of WACCs of three
divisions
Lodging
Restaurant
Contract services
Financial Strategy
Manage
Beta
Hilton
0.14
0.88
0.76
Holiday 0.79
1.46
0.31
La Quinta
0.69
0.38
0.12
Ramada 0.65
0.95
0.34
Average asset beta = 0.38
Leverage
0.04
0.10
0.06
0.01
0.23
0.21
Eq. Beta
0.75
0.60
0.13
0.64
1.00
1.08
Asset Beta
0.72
0.54
0.12
0.63
0.77
0.85
L + (V / V ) * R + (V / V ) * CS
M
=
(
V
/
V
)
*
L M
R M
CS M
A
A
A
A
11.89%