Teletech Case

Teletech Corporation described itself as a provider of incorpo driftd information movement and management. It was comprised of deuce business pieces: the Telecommunications enmesh and the productions and Systems divisions. The telecommunications business which provides telephone services throughout the Midwest and southwest are its only business before 2000 when it added the Products and Systems divisions after its achievement of a computing workstation manufacturer. Teletech has long used a booster corporate 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 pitch 9.3% will be rejected and anything to a higher place 9.3% has a good chance of being demanded. Actually the infallible rate of return and the systematic ri sk of cash flows for to all(prenominal) one project were not equal. Actually the projects with low return has a bring down beta and would open a lower bank vault rate and projects with high(prenominal) return have a higher beta and higher bank vault rate.

The coat 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 early(a) words, it would lead to stupid rejects for Telecom services while signalise 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 . only if it is improbable to accurately es! timate beta for each projects, we read to find hurdle rates for projects with similar risks. In the event of Teletech, the telecomuncitions industry is little unfit with lower return and 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: OrderEssay.net

If you want to get a full information about our service, visit our page: write my essay