Teletech Case

Background The Teletech Corporation ope pass judgmentd in two business shares: Telecommunications Services (TS), and Products and Systems (P&S). though Teletech was a dominant service provider in the area, the companionship has been experiencing a downtrend of earning growth and stock prices due to keener competition and worse performance in certain segment. Problems statement Teletech has been using economic internet as a measure of value creation at the segment and business-unit level and net present value as a measure of value creation at the honk level; and both these values were calculated using the burial vault rate. The main problem faced by Teletech was that the company leadership had to decide what burial vault rate(s) should be used for evaluating performance and bud line uping of separately segment; and what would be the future of the P&S unit, having in mind the accusatory letter of the new 10% stakeholder, headmaster Yossarian. By October 2005 only one corporate hurdle rate of 9.30% was used for performance assessment, and the rate was based on the Teletechs WACC as a representation of the opportunity cost of money. thither was an ongoing debate if one common corporate hurdle rate should continue be used for valuation, or incompatible hurdle evaluate which take into account the associated with the investments risk should be implemented.

There was a doubt that the returns of the P&S segment were relatively high because they were compared to the not risk-adjusted corporate hurdle rate, and that in fact the P&S segment was reducing the shareholders value. sea captain Yossarians opinion was that Teletech had to get rid of the P&S segment as it was not providing adequate return. Hurdle pass judgment recommendation We recommend that Teletech should use two incompatible hurdle rates for both segments. First, using WACC as a corporate hurdle rate is not appropriate since different segments have different investment risks. The Products and Systems segment (with the beta of 1.36) clearly had higher... If you want to get a full essay, order it on our website: Ordercustompaper.com

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