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Exhibit 1 Financial History of Marriott Corporation (dollars in millions, except per share amounts)

1978 1979 1980 1981Summary of Operations

Sales 1,174.1 1,426.0 1,633.9 1,905.7Earnings before interest expense and income taxes 107.1 133.5 150.3 173.3Interest Expense 23.7 27.8 46.8 52.0Income before income taxes 83.5 105.6 103.5 121.3Income taxes 35.4 43.8 40.6 45.2Income from continuing operations 48.1 61.8 92.9 76.1Net Income 54.3 71.0 72.0 86.1Funds provided from cont. operations 101.2 117.5 125.8 160.8

Capitalization and Returns

Total Assets 1,000.3 1,080.4 1,214.3 1,454.9Total capital(c) 826.9 891.9 977.7 1,167.5Long-term debt 309.9 365.3 536.6 607.7 Percent to total capital 37.5% 41.0% 54.9% 52.1%Sharholders' equity 418.7 413.5 311.5 421.7

Per Share and Other Data

Earnings per share: Continuing operations (a) 0.25 0.34 0.45 0.57 Net income 0.29 0.39 0.52 0.64Cash Dividends 0.026 0.034 0.042 0.051Shareholders' equity 2.28 2.58 2.49 3.22Market price at year end 2.43 3.48 6.35 7.18Shares outstanding (in millions) 183.6 160.5 125.3 130.8Return on avg. shareholders' equity 13.9% 17.0% 23.8% 23.4%

Source: Company Reports(a) The Company's theme park operations were discontinued in 1984(b) Funds provided from continuing operations consist of income from continuing operations plus depreciation, deferred income taxes, and other items not currently affecting workign capital.(c) Total capital represents total assets less current liabilities

Exhibit 2 Financial Summary of Marriott by Business Segment, 1982-1987 (dollars in millions)

1982 1983 1984 1985 1986Lodging: Sales $1,091.7 $1,320.5 $1,640.8 $1,898.4 $2,233.1

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Operating profit 132.6 139.7 161.2 185.8 215.7Identifiable assets 909.7 1,264.6 1,786.3 2,108.9 2,236.7Depreciation 22.7 27.4 31.3 32.4 37.1Capital expenditures 371.5 377.2 366.4 808.3 966.6

Contract Services: Sales 819.8 950.6 1,111.3 1,586.3 2,236.1Operating profit 51.0 71.7 86.8 118.6 154.9Identifiable assets 373.3 391.6 403.9 624.4 1,070.2Depreciation 22.9 26.1 28.9 40.2 61.1Capital expenditures 127.7 43.8 55.6 125.9 448.7

Retaurants: Sales 547.4 679.4 707.0 757.0 797.3Operating profit 48.5 63.8 79.7 78.2 79.1Identifiable assets 452.2 483.0 496.7 582.6 562.3Depreciation 25.1 31.8 35.5 34.8 38.1Capital expenditures 199.6 65.0 72.3 128.4 64.0

Source: Company Reports

Exhibit 3 Information on Comparable Hotel and Restaurant Companies

Aritmetic (a)Average Equity (b) Market (c) Return Beta Leverage

MARRIOTT CORPORATION 22.40% 1.11 41%(owns, operates, and manages hotels, restaurants, and airline and institutional food services.)

Hotels:

HILTON HOTELS CORPORATION 13.30% 0.76 14%(owns, manages, and licenses hotels. Operates casinos.)

HOLIDAY CORPORATION 28.80% 1.35 79%(Owns, operates, and licenses hotels and restaurants.Operates casinos.)

LA QUINTA MOTOR INNS -6.40% 0.89 69%(Owns, operates, and licenses motor inns.)

RAMADA INNS, INC. 11.70% 1.36 65%(Owns and operates hotels and restaurants.)

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Restaurants:

CHURCH'S FRIED CHICKEN -3.20% 1.45 4%(owns and franchises restaurants and gaming businesses.)

COLLINS FOODS INTERNATIONAL 20.30% 1.45 10%(Operates Kentucky Fried Chicken franchiseand moderately prices restaurants.)

FRISCH'S RESTAURANTS 56.90% 0.57 6%(Operates and franchises restaurants.)

LUBY'S CAFETERIAS 15.10% 0.76 1%(Operates Cafeterias.)

MCDONALD'S 22.50% 0.94 23%(Operates, franchises, and services restaurants.)

WENDY'S INTERNATIONAL 4.60% 1.32 21%(Operates, franchises, and services restaurants.)

Source: Casewriter estimates.

(a) Calculated over the five-year priod of 1983-1987(b) Estimated using five years of monthly data over the 1983-1987 period by ordinary least squares(c) Book value of debt divided by the sum of the book value of debt plus the market value of equity.

Exhibit 4 Annual Holding-Period Returns for Selected Securities and market Indexes, 1926-1987

Arimethic Standard Years Average Deviation

Short-term Treasury bills:

1926-87 3.54% 0.94%1926-50 1.01% 0.40%1951-75 3.67% 0.56%1976-80 7.80% 0.83%1981-85 10.32% 0.75%

1986 6.16% 0.19%1987 5.46% 0.22%

Long-term U.S. Government bonds returns:

1926-87 4.58% 7.58%1926-50 4.14% 4.17%1951-75 2.39% 6.45%

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1976-80 1.95% 11.15%1981-85 17.85% 14.26%

1986 24.44% 17.30%1987 -2.69% 10.28%

Long-term, high-grade corporate bond returns:

1926-87 5.24% 6.97%1926-50 4.82% 3.45%1951-75 3.05% 6.04%1976-80 2.70% 10.87%1981-85 18.96% 14.17%

1986 19.85% 8.19%1987 -0.27% 9.64%

Standard and Poor's 500 Composit Stock Index returns:

1926-87 12.01% 20.55%1926-50 10.90% 27.18%1951-75 11.87% 13.57%1976-80 14.81% 14.60%1981-85 15.49% 13.92%

1986 18.47% 17.94%1987 5.23% 30.50%

Source: Casewriter estimates based on data from the University ofChicago's Center for Research in Security Prices.

Exhibit 5 Spreads between S&P 500 Composite Returns and Bond Rates

Arimethic Standard Years Average Deviation

Spread between S&P 500 Compsoite returns and short-term U.S. Treasury bill returns:

1926-87 8.47% 20.60%1926-50 9.89% 27.18%1951-75 8.20% 13.71%1976-80 7.01% 14.60%1981-85 5.17% 14.15%

1986 12.31% 17.92%1987 -0.23% 30.61%

Spread between S&P 500 Compsoite returns and long-term U.S. Government bond returns:

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1926-87 7.43% 20.78%1926-50 6.76% 26.94%1951-75 9.48% 14.35%1976-80 12.86% 15.58%1981-85 -2.36% 13.70%

1986 -5.97% 14.76%1987 7.92% 35.35%

Spread between S&P 500 Compsoite returns and long-term high-grade corporate bond returns:

1926-87 6.77% 20.31%1926-50 6.06% 26.70%1951-75 8.82% 13.15%1976-80 12.11% 15.84%1981-85 -3.47% 13.59%

1986 -1.38% 14.72%1987 5.50% 34.06%

Source: Casewriter estimates based on data from the University ofChicago's Center for Research in Security Prices.

Marriott Corporation: The Cost of Capital (Abridged) Harvard Business School

Case Software 2-293-753

Copyright (c) 1993 by the President and Fellows of Harvard College.

Professor Richard S. Ruback prepared this case as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation

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WORKSHEET NAVIGATION

This worksheet contains the data from the following exhibits:

Exhibit 1: Financial History of Marriott Corporation

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Exhibit 2: Financial Summary of Marriott by Business Segment, 1982-1987 Exhibit 3: Information on Comparable Hotel and Restaurant CompaniesExhibit 4: Exhibit 4 Annual Holding-Period Returns for Selected Securities

and market Indexes, 1926-1987Exhibit 5: Spreads between S&P 500 Composite Returns and Bond Rates

The first exhibit is located in the A1 position. To view each succeeding exhibit, use the SCROLL Bar to view the next exhibit

OPTIONAL NAVIGATIONAL TECHNIQUE

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from one section of the worksheet to another. Either of the followingtechniques will allow you to move from one exhibit to another.

Click on in the menu bar, then select from pulldown menuA dialog box will appear listing the exhibits Click on the exhibit you wish to view, then click on .

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1982 1983 1984 1985 1986 1987

2,458.9 2,950.5 3,524.9 4,241.7 5,266.5 6,522.2

205.5 247.9 297.7 371.3 420.5 489.471.8 62.8 61.6 75.6 60.3 90.5

133.7 185.1 236.1 295.7 360.2 398.950.2 76.7 100.8 128.3 168.5 175.983.5 108.4 135.3 167.4 191.7 223.094.3 115.2 139.8 167.4 191.7 223.0

203.6 272.7 322.5 372.3 430.3 472.8

2,062.6 2,501.4 2,904.7 3,663.8 4,579.3 5,370.51,634.5 2,007.5 2,330.7 2,861.4 3,561.8 4,247.8

889.3 1,071.6 1,115.3 1,192.3 1,662.8 2,498.854.4% 53.4% 47.9% 41.7% 46.7% 58.8%516.0 628.2 675.6 848.5 991.0 810.8

0.61 0.78 1.00 1.24 1.40 1.670.69 0.83 1.04 1.24 1.40 1.67

0.063 0.076 0.093 0.113 0.136 0.1703.89 4.67 5.25 6.48 7.59 6.82

11.70 14.25 14.70 21.58 29.75 30.00132.8 134.4 128.8 131.0 130.6 118.820.0% 20.0% 22.1% 22.1% 20.6% 22.2%

(b) Funds provided from continuing operations consist of income from continuing operations plus depreciation,

1987

$2,673.3

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263.92,777.4

43.91,241.9

2,969.0170.6

1,237.775.3

112.7

879.982.4

567.642.179.6

1987Revenues($ billions)

6.52

0.77

1.66

0.17

0.75

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0.39

0.57

0.14

0.23

4.89

1.05

(b) Estimated using five years of monthly data over the 1983-1987 period by ordinary least squares(c) Book value of debt divided by the sum of the book value of debt plus the market value of equity.

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MARRIOT