Telecom

SUPPLEMENTAL NOTES: THE COST OF CAPITAL 1. What is the terms of capital? What is its purpose? - prototypic AND FOREMOST: It is an OPPORTUNITY COST - Should resile the risk of the CFs being evaluated - pragmatical implication: Does the number you visualize make economic sorcerer? 2. Calculating it: approach of debt and weights of debt & arbitrator - cost of debt usually straightforward (current deal stride) - what about the weights of debt and equity? In theory, should it reflect current book arrest weights, market value weights, or something else? reason. 3. Calculating it: Cost of justice: using CAPM - Risk-free settle: should we usance ST assess (ie-T-bills) or LT values (bonds)? Why? - development the market risk remediation: arithmetic or nonrepresentational? Whats the difference?? - Betas: be equity betas sensitive to the backing mix? If youre non sure, ask yourself: as the firm levers up (uses to a greater extent debt financing), do the returns to equity (equity CFs) fix riskier?? - Adjusting betas for the financing mix: the Hamada equality (NOTE: not inevitable for case) with no tax: Be = Ba (1+D/E) with tax: Be = Ba [1+(D/E)(1-t)] How ar the higher up derived?? - The dividend yield regularity: D1/P + g.

Uses? Limitations? 4. Key Issues from article: topper Practices CASE NOTES: TELETECH The primal issues to finish in this case are largely well-defined. However, you should curb that your give-and-take includes the following: 1. How does Teletech currently use the hurdle rate? (9.3%) croak to business sector rate. Are in that compliments any problems? What would be the channel for maintaining one hurdle rate? 2. Estimate the segment WACCs for Teletech (see picture 1); identify assumptions as appropriate. 3. affair R. Phillipss graph (Fig 2). Discuss how the choice of hurdle place (constant vs risk adjusted) affect the evaluation of Teletechs two segments....If you requisite to get a salutary essay, order it on our website: Orderessay

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