Case 15: Teletech Corporation, 2005

Question 1 Currently, 9.30% is apply as their vault go and comfortable with the intellectual relevance of a hurdle footprint as an expression of the opportunity cost of money by the managers. As a result the profligates sh atomic number 18 prices ar sluggish. Their price-to-earnings ratio is also to a lower place investors expectation in parity to the companys fortune. The relationship between take chances and exit is important to take into consideration. The constant hurdle rate results in a flat line and doesnt correlate risk with government issue. With nearly $2 billion being invested in forthcoming great(p) projects, the discount rate to be used within the stiff needs to be more accurate, mark for risk, and not pulverise shareholders value. Currently the firm is not accurately assessing their future. Telecommunications go is returning capital below the corporate hurdle rate and Products & Systems is above the rate, but the firm is not figure in riski ness of the segments individu entirelyy. Question 2 [pic] consumption CAPM work to estimate their cost of equity. Exhibit 3; the median(a) beta and tip of debt for telecommunications services industry are 1.04 and 27.1%, respectively. For Telecommunications embody of Equity Ts= Rf +?* (Rm - Rf) = 4.62% + 1.04 *5.5% = 10.34% WACCTS= 27.1% * 3.44%+ 72.9% * 10.34%= 8.

47% For Products & Systems fair(a) of Beta = (1.39+ 1.33)/ 2= 1.36 Average of Weight of debt= (13.1%+ 5.3%)/ 2= 9.20% Cost of Equity PS= Rf +?*(Rm - Rf) = 4.62%+ 1.36* 5.5%= 12.1% WACCPS= 9.20%* 4.48%+ 90.80% * 12.10%= 11.4% Question 3 The WACC for Teletech Corp is calculated at 9.30%, which is the n employ to all investment and performance-! measurement analyses of the firm. When looking strictly at this, the Telecommunications Services is down the stairs performing with a return on capital of 9.10%. The Products & Systems segments are well over the required rate of return, earning a return on capital of 11.0%. The constant hurdle rate results in a flat line and doesnt correlate...If you trust to possess a full essay, order it on our website: OrderEssay.net

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