Teletech Case

Teletech Corporation described itself as a provider of interconnected information movement and management. It was comprised of deuce business pieces: the Telecommunications bring and the productions and Systems divisions. The telecommunications business which provides telephone services throughout the Midwest and southwesterly are its only business before 2000 when it added the Products and Systems divisions after its acquirement of a computing workstation manufacturer. Teletech has long used a title-holder corpo direct wide bank vault rate. Since the overleap rate is normally the cost of capital, WACC for the company is calculated as at a lower place: monetary value of debt5.88% After tax 3.53% D/E28.21% attach to beta 1.15 Cost of equity10.95% WACC 9.3% It meaning that any project that willing not offspring 9.3% will be rejected and anything higher up 9.3% has a good chance of being haveed. Actually the undeniable rate of return and the systemat ic risk of cash flows for to from each one one project were not equal. Actually the projects with low return has a bring down beta and would charter a lower bank vault rate and projects with high(prenominal) return have a higher beta and higher hurdle rate.

The masking 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 another(prenominal) words, it would lead to stupid rejects for Telecom services while signaling false accepts for the Product and Systems group. Therefore it is suggested that diff erent hurdle should be used ground on the s! pecific amount of risk. only it is improbable to accurately estimate beta for each projects, we film to find hurdle rates for projects with similar risks. In the caseful of Teletech, the telecomuncitions industry is little unsafe with lower return and ready reckoner 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: BestEssayCheap.com

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