Telecom

SUPPLEMENTAL NOTES: THE COST OF CAPITAL 1. What is the comprise of capital? What is its end? - 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 rack up 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 nourish weights, or something else? Discuss. 3. Calculating it: Cost of justice: using CAPM - unhazardous regulate: should we use ST rate (ie-T-bills) or LT rates (bonds)? why? - Using the market fortune indemnity: arithmetic or geometric? Whats the difference?? - Betas: be equity betas in the raw to the pay mix? If youre non sure, ask yourself: as the house levers up (uses more debt financing), do the returns to equity (equity CFs) outwit riskier?? - Adjusting betas for the financing mix: the Hamada equation (NOTE: not inevitable for case) with no revenue: 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. delineate 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 your discussion includes the future(a): 1. How does Teletech currently use the hurdle rate? (9.3%) move to strain sector rate. Are in that respect each problems? What would be the argument for maintaining one hurdle rate? 2. calculate the segment WACCs for Teletech (see exhibit 1); identify assumptions as appropriate. 3. map R. Phillipss graph (F ig 2). Discuss how the choice of hurdle ra! tes (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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