In April 1988, Dan Cohrs, vice president of project finance at the Marriott Corporation, was
preparing his annual recommendations for the hurdle rates at each of the firm’s three divisions.
Investment projects at Marriott were selected by discounting the appropriate cash flows by the
appropriate hurdle rate for each division.
In 1987, Marriott’s sales grew by 24% and its return on equity (ROE) stood at 22%. Sales and
earnings per share had doubled over the previous four years, and the operating strategy was aimed
at continuing this trend. Marriott’s 1987 annual report stated that:

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