Telecom

SUPPLEMENTAL NOTES: THE COST OF CAPITAL 1. What is the embody of capital? What is its map? - archetypal AND FOREMOST: It is an OPPORTUNITY COST - Should reflect the peril of the CFs being evaluated - hard-nosed implication: Does the number you calculate specify economic whizz? 2. Calculating it: cost of debt and weights of debt & justice - cost of debt usually straightforward (current merchandise stride) - what about the weights of debt and equity? In theory, should it reflect current book entertain weights, market prise weights, or something else? Discuss. 3. Calculating it: Cost of justice: using CAPM - take chancesless regulate: should we use ST rate (ie-T-bills) or LT rates (bonds)? why? - Using the market risk indemnity: arithmetic or geometric? Whats the difference?? - Betas: be equity betas sensitive to the financing mix? If youre non sure, ask yourself: as the unshakable levers up (uses more debt financing), do the returns to equity (equity CFs) uprise riskier?? - Adjusting betas for the financing mix: the Hamada equation (NOTE: not inevitable for case) with no tax: Be = Ba (1+D/E) with tax: Be = Ba [1+(D/E)(1-t)] How are the above derived?? - The dividend yield regularity: D1/P + g.

Uses? Limitations? 4. bring up Issues from article: Best Practices CASE NOTES: TELETECH The primal issues to address in this case are largely well-defined. However, you should curb that y our discussion includes the undermentioned:! 1. How does Teletech currently use the hurdle rate? (9.3%) move to championship sector rate. Are in that respect any problems? What would be the argument for maintaining one hurdle rate? 2. see the segment WACCs for Teletech (see exhibit 1); identify assumptions as appropriate. 3. map R. Phillipss graph (Fig 2). Discuss how the choice of hurdle rates (constant vs risk adjusted) affect the evaluation of Teletechs two segments....If you fate to get a full essay, order it on our website: OrderCustomPaper.com

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