Teletech Case

Teletech Corporation described itself as a provider of unify information movement and management. It was comprised of deuce business pieces: the Telecommunications lean and the productions and Systems divisions. The telecommunications business which provides telephone services throughout the Midwest and southwestern are its only business before 2000 when it added the Products and Systems divisions after its skill of a computing workstation manufacturer. Teletech has long used a magician corpo tread wide bank vault rate. Since the overleap rate is normally the cost of capital, WACC for the company is calculated as downstairs: monetary value of debt5.88% After tax 3.53% D/E28.21% federation beta 1.15 Cost of equity10.95% WACC 9.3% It meaning that any project that volition not contain 9.3% will be rejected and anything to a higher place 9.3% has a good chance of being supported. Actually the undeniable rate of return and the systematic risk of cash f lows for to distributively one project were not equal. Actually the projects with low return has a bring down beta and would switch a lower bank vault rate and projects with high(prenominal) return have a higher beta and higher overleap rate.

The exertion of single hurdle rate will result in rejection of projects which return is higher than the actual hurdle rate and accept projects which return is lower than the actual hurdle rate. In former(a) words, it would lead to stupid rejects for Telecom services while sign of the zodiac false accepts for the Product and Systems group. Therefore it is suggested that different hurdle should be used ground on the specific amount of risk . provided it is improbable to accurately e! stimate beta for each projects, we bring to find hurdle rates for projects with similar risks. In the trip of Teletech, the telecomuncitions industry is little savage with lower return and information processing system and telecommunications products and services segment by contrast is more risky with higher return. It means that Teletech should apply two separate hurdle rate for the two business segments....If you want to get a full essay, determine it on our website: OrderEssay.net

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