Teletech Case

1. How does Teletech currently use the bank vault rate? Teletech currently uses the hurdle rate in the assessment of the firms economical profit and NPV. The rate is based on an estimate of Teletechs WACC. Currently, the hurdle rate for Teletech is 10.407%, using data in physical body 1. The case rounds this number to 10.41% 2. What are the plane section WACCs for Teletech? What assumptions do you concur to make to do these calculations? Using the data in excogitation 1, we stomach calculate the WACC for the telecom Services persona and the Products and Systems division of Teletech. Telecom Services WACC is 10.404% trance Products and Services WACC is 10.417%. Assumptions need to be made for the Cost of Equity. We used the corporate rate of 11.766% (~11.77%) for the segments WACC. Also, we are assuming the weight of Debt to Equity in each segment is the same as the corporation. The corporations weights are 18% Debt and 82% Equity. 3. Look at Rick Phillips graph. How does the plectron of constant vs. risk-adjusted hurdle rates affect the evaluation of Teletechs two segments? What are the implications for Teletechs resource-allocation strategy? Using the graph, we can see that the Telecom Services segments returns are lower, 9.8%, than the corporate hurdle rate of 10.41%.

Products and Systems returns are 12%, but at a much higher risk. The high risk is inferred by the occurrence that comparable equipment manufacturers are finances by higher endure BBB-rated debt and more equity with higher expected total returns. after(prenominal) adjusting for risk, (sloped line on the graph) we can see that Telecom is above this line, earning excess returns for the amount of risk. Products and Systems is below this line, underperforming for the given level of risk. Telecom Services will gradually run out of capital, while Products and Systems will be given much more silver than it actually deserves, given its risk. The Telecom segment lowers the risk of the immaculate company, and it is... If you want to get a full essay, order it on our website: Orderessay

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