Marriott Corporation - K -Abridged

Marriott Corporation: The Cost of Capital Asset beta for Lodging Market Value of Leveraged Leverage Equity Beta Hilton Hotels 0.14 Holiday Corporation 0.79 La Quinta Motor Inns 0.69 Ramada Inns, Inc 0.65 Average

Unleveraged Asset Beta 0.76 0.69 1.25 0.38 0.89 0.38 1.36 0.64 0.53

Weighted Average (by Sales) Asset beta

Asset Betas for Restaurants C's Fried Chicken Collins Foods International Frisch's Restaurants Luby's Cafeterias McDonald's Wendy's International Average Weighted Average (by Sales) Asset beta

0.51

0.04 0.1 0.06 0.01 0.23 0.21

1.45 1.45 0.57 0.76 0.94 1.32

1.41 1.36 0.55 0.76 0.80 1.14 1.00

0.92

Unleveraged Adjusted Equity Adjusted Asset Beta Beta 1987 Revenues 0.84 0.76 0.77 1.17 0.36 1.66 0.93 0.40 0.17 1.24 0.59 0.75 0.53

0.50

1.30 1.30 0.71 0.84 0.96 1.21

1.27 1.22 0.69 0.83 0.81 1.05 0.98

0.90

0.39 0.57 0.14 0.23 4.89 1.05

Marriott Corporation: The Cost of Capital WACC for Marriott Corporation Unlever the Beta Levered Equity beta Actual Debt / Value ratio Unlevered Asset beta

1.11 41.22% 0.78

Lever the Asset beta Unlevered Asset beta Target Debt / Value ratio Levered Equity beta

0.78 60% 1.48

Equity Cost of Capital Risk free rate - Yield on 30-years US T-bonds Average Market Risk Premium (1926-1987) Levered Equity beta Cost of Equity using CAPM Cost of Debt Risk free rate - Yield on 30-years US T-bonds Credit spread - Premium for Credit Risk

WACC

8.95% 7.43% 1.48 19.98%

8.95% 1.30% 10.25% 11.68%

Marriott Corporation: The Cost of Capital WACC for Lodging Division Lever the Asset beta Unlevered Asset beta Target Debt / Value ratio Levered Equity beta Equity Cost of Capital Risk free rate - Yield on 30-years US T-bonds Average Market Risk Premium (1926-1987) Levered Equity beta Cost of Equity using CAPM Cost of Debt Risk free rate - Yield on 30-years US T-bonds Credit spread - Premium for Credit Risk

WACC

0.53 74% 1.42

8.95% 7.43% 1.42 19.51%

8.95% 1.10% 10.05% 9.54%

Marriott Corporation: The Cost of Capital WACC for Restaurant Division Lever the Asset beta Unlevered Asset beta Target Debt / Value ratio Levered Equity beta Equity Cost of Capital Risk free rate - Yield on 10-years US T-bonds Average Market Risk Premium (1926-1987) Levered Equity beta Cost of Equity using CAPM Cost of Debt Risk free rate - Yield on 10-years US T-bonds Credit spread - Premium for Credit Risk

WACC

1.00 42% 1.44

8.72% 7.43% 1.44 19.40%

8.72% 1.80% 10.52% 13.90%

Marriott Corporation: The Cost of Capital WACC for Contract Services Division Asset beta - Marriott Corporation Asset beta - Lodging Division Asset beta - Restaurant Division Asset beta - Contract Services division Identifiable Assets as a proxy for Market Value Lodging Division Restaurant Division Contract Services division

Lever the Asset beta Unlevered Asset beta Target Debt / Value ratio Levered Equity beta Equity Cost of Capital Risk free rate - Yield on 10-years US T-bonds Average Market Risk Premium (1926-1987) Levered Equity beta Cost of Equity using CAPM Cost of Debt Risk free rate - Yield on 10-years US T-bonds Credit spread - Premium for Credit Risk

WACC

0.78 0.53 1.00 1.11

909.7 373.3 452.2 1735.2

1.11 40% 1.56

8.72% 7.43% 1.56 20.31%

8.72% 1.40% 10.12% 14.62%

0.52 0.22 0.26

Marriott Corporation: The Cost of Capital Marriott Corp.

Unlevered Asset beta Debt / Value ratio Levered Equity beta Required rate of return on debt Cost of Equity WACC

Lodging Division

Restaurant Divison

0.78 60% 1.48

0.53 74% 1.42

1.00 42% 1.44

10.25% 19.98% 11.68%

10.05% 19.51% 9.54%

10.52% 19.40% 13.90%

Contract Services

1.11 0.40 1.56 10.12% 20.31% 14.62%

Amazon, Inc. $1.25 billion Convertible Bonds Issue in 1999 Coupon Credit Rating CCC+ Par Value Issued at discount - 98 Interest Rate on Plain Vanila Debt for comparable credit rating firm Cash Flows 1/1/1999 6/30/1999 12/31/1999 6/30/2000 12/31/2000 6/30/2001 12/31/2001 6/30/2002 12/31/2002 6/30/2003 12/31/2003 6/30/2004 12/31/2004 6/30/2005 12/31/2005 6/30/2006 12/31/2006 6/30/2007 12/31/2007 6/30/2008 12/31/2008

4.75% 1000 980

11% Debt Component Equity Component -980 23.75 23.75 23.75 23.75 23.75 23.75 23.75 23.75 23.75 23.75 23.75 23.75 23.75 23.75 23.75 23.75 23.75 23.75 23.75 1023.75

$626.55 $353.45