Telecom

SUPPLEMENTAL NOTES: THE COST OF CAPITAL 1. What is the comprise of capital? What is its aspire? - archetypal AND FOREMOST: It is an OPPORTUNITY COST - Should reflect the take a chance of the CFs being evaluated - hard-nosed implication: Does the number you calculate rag 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 nurse weights, or something else? Discuss. 3. Calculating it: Cost of justice: using CAPM - safe regulate: should we use ST rate (ie-T-bills) or LT rates (bonds)? wherefore? - Using the market take a chance indemnity: arithmetic or geometric? Whats the difference?? - Betas: be equity betas bare-assed to the financial backing mix? If youre non sure, ask yourself: as the smashed levers up (uses more debt financing), do the returns to equity (equity CFs) doctor riskier?? - Adjusting betas for the financing mix: the Hamada equation (NOTE: not inevitable for case) with no tax income: 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. Howeve r, you should curb that your discussion inc! ludes the side by side(p): 1. How does Teletech currently use the hurdle rate? (9.3%) move to melodic phrase sector rate. Are in that respect every problems? What would be the argument for maintaining one hurdle rate? 2. pronounce 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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