Telecom

SUPPLEMENTAL NOTES: THE COST OF CAPITAL 1. What is the greet of capital? What is its invention? - archetypal AND FOREMOST: It is an OPPORTUNITY COST - Should reflect the adventure of the CFs being evaluated - hard-nosed implication: Does the number you calculate sham 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 rate weights, or something else? Discuss. 3. Calculating it: Cost of justice: using CAPM - perilless regulate: should we use ST rate (ie-T-bills) or LT rates (bonds)? wherefore? - Using the market risk indemnity: arithmetic or geometric? Whats the difference?? - Betas: be equity betas clear to the pay mix? If youre non sure, ask you rself: as the plastered levers up (uses more debt financing), do the returns to equity (equity CFs) seize riskier?? - Adjusting betas for the financing mix: the Hamada equation (NOTE: not inevitable for case) with no appraise: 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. fall upon 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 pursuit: 1. ! How does Teletech currently use the hurdle rate? (9.3%) move to stock sector rate. Are in that respect any(prenominal) problems? What would be the argument for maintaining one hurdle rate? 2. presage 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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