Case 15: Teletech Corporation, 2005

Question 1
Currently, 9.30% is apply as their hurdle drift and comfortable with the intellectual relevance of a hurdle footstep as an expression of the opportunity cost of money by the managers. As a result the profligates sh atomic number 18 prices are sluggish. Their price-to-earnings ratio is also to a lower place investors expectation in comparison to the companys fortune. The relationship between risk and return is important to take into consideration. The constant hurdle rate results in a flat line and doesnt correlate risk with return. With nearly $2 billion being invested in upcoming great(p) projects, the discount rate to be used within the bulletproof needs to be more accurate, mark for risk, and not destroy 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 factoring in riskiness of the segments individually.


Question 2
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consumption CAPM model to estimate their cost of equity.
Exhibit 3; the median(a) beta and weight 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 then employ to all investment and performance-measurement analyses of the firm. When looking strictly at this, the Telecommunications Services is under 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 get a full essay, order it on our website: Orderessay



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