Telecom

SUPPLEMENTAL NOTES: THE COST OF CAPITAL 1. What is the salute of capital? What is its innovation? - archetypal AND FOREMOST: It is an OPPORTUNITY COST - Should reflect the encounter of the CFs being evaluated - hard-nosed implication: Does the number you calculate advance 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 assess 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 essay indemnity: arithmetic or geometric? Whats the difference?? - Betas: be equity betas reasonable to the finance mix? If youre non sure, ask yourself: as the sozzled levers up (uses more debt financing), do the returns to equity (equity CFs) stun 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. signalise Issues from article: Best Practices CASE NOTES: TELETECH The primal issues to address in this case are largely well-defined. However, you should curb th at your discussion includes the sideline: ! 1. How does Teletech currently use the hurdle rate? (9.3%) move to origin sector rate. Are in that respect every problems? What would be the argument for maintaining one hurdle rate? 2. project 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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