Background Information On September 23, 2016, Marriott completed the acquisition of the Startwood...

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Background Information On September 23, 2016, Marriott completed the acquisition of the Startwood Hotels & Resorts Worldwide. Marriott paid $13.3 billion for Starwood. Did Marriott overpaid or get a...

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Background Information

On September 23, 2016, Marriott completed the acquisition of the Startwood Hotels & Resorts Worldwide. Marriott paid $13.3 billion for Starwood. Did Marriott overpaid or get a good deal? What needs to happen to make the acquisition worthwhile for Marriott? Let's find out.

Instruction:

Click the link to read the article about the Extended Stay valuation. (https://tinyurl.com/wmdepzmb).
Use the attached historical cash flows as the base to estimate next 10 years' cash flows XXXXXXXXXXas in the Extended Stay article. Explain how you decide the cash flow and its growth rate. This article (https://tinyurl.com/2w44a7wp) has good information to help you with the cash flow and discount adjustments.(4 points).
Follow Technique 4: 10-year DCF in Chen & Kim XXXXXXXXXXin Week 4 to calculate the present value of Starwood. Show your calculation on this spreadsheet. Please justify your choice of the terminal cap rate and discount rate (i.e. required return) in the box below. You can use the information from the assigned articles, the Hotel Perennial case, or anything you find on the Internet. Please include the citations. (6 points)
Extra points opportunity: Your answer is likely to be very different from the $13.3 billion price tag paid by Marriott. What adjustment do you need to make on the cash flows, cash flow growth rate, terminal discount rate, and the discount rate to make your calculated value close to $13.3 billion. Are assumptions for those adjustments feasible or reasonable? (Bonus: 5 points)

hwstarwood-valuation-t5oqhahx.xlsx hwstarwood-valuation-naqv2gkb-m3lgyyka.xlsx

Answered 2 days After Apr 28, 2021

Sugandh · Accepted Answer

Q1
	Hotel X
	For the purpose of this assignment, assume Operating Cash Flow is the Levered Free Cash Flow needed for the calculation.
	Data Date	Operating Cash Flow
	12/31/01	761
	12/31/02	706
	12/31/03	771
	12/31/04	578
	12/31/05	764
	12/31/06	500
	12/31/07	895
	12/31/08	646
	12/31/09	571
	12/31/10	764
	12/31/11	641
	12/31/12	1184
	12/31/13	1151
	12/31/14	994
	12/31/15	890
Q2&Q3
	Explanations:
	Q2. Explain how you decide the cash flow and its growth rate.
	The Analysis considered in terms with the cashflow is that the discounting is evident on a 10 years analysis the average will be around be around 14 percent from the following figuers.
	Question 2 
	0-year free cash flow (FCF) estimate in million
	Year	2016	2017	2018	2019	2020	2021	2022	2023	2024	2025
	A/P	Actual	Actual	Actual	Actual	Actual	Projected	Projected	Projected	Projected	Projected
	Revenue	664.7	628.93	836.36	959.42	1,136.15	1,260.38	1,398.19	1,551.07	1,720.66	1,908.80
	EBITDA	-	-	-	-	426.41	473.03	524.75	582.13	645.78	716.39
	EBIT	-61.57	-90.9	-130.84	-113.39	386.28	372.92	413.69	458.93	509.11	564.77
	Tax Rate	2.87%	9.80%	9.54%	7.36%	5.23%	6.69%	6.69%	6.69%	6.69%	6.69%
	EBIAT	-59.8	-81.99	-118.35	-105.05	366.08	347.99	386.04	428.25	475.07	527.01
	Depreciation	61.57	90.9	130.84	113.39	40.13	100.11	111.06	123.2	136.67	151.62
	Accounts Receivable	6.09	-19.52	-12.61	-3.73	-4.31	-7.48	-8.3	-9.2	-10.21	-11.33
	Inventories	-	-	-	-	-	-	-	-	-	-
	Accounts Payable	41.33	-13.02	32.55	-5.66	-5.16	115.28	35.22	39.07	43.34	48.08
	Capital Expenditure	-15.96	-518.19	257.1	313.03	-199.5	-221.31	-245.51	-272.36	-302.14	-335.17
	UFCF	33.23	-541.83	289.52	311.99	197.24	334.59	278.51	308.96	342.

Background Information On September 23, 2016, Marriott completed the acquisition of the Startwood Hotels & Resorts Worldwide. Marriott paid $13.3 billion for Starwood. Did Marriott overpaid or get a...

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