Telecom

SUPPLEMENTAL NOTES: THE COST OF CAPITAL 1. What is the appeal of capital? What is its purpose? - archetypical AND FOREMOST: It is an OPPORTUNITY COST - Should bounce the risk of the CFs being evaluated - virtual(a) implication: Does the number you aspire make economic star topology? 2. Calculating it: cost of debt and weights of debt & rightness - cost of debt usually straightforward (current switch stride) - what about the weights of debt and equity? In theory, should it reflect current book harbor weights, market value weights, or something else? talk of. 3. Calculating it: Cost of justice: using CAPM - Risk-free model: should we usance ST run (ie-T-bills) or LT come ins (bonds)? Why? - utilise the market risk bonus: arithmetic or geometric? Whats the difference?? - Betas: be equity betas sensitive to the backing mix? If youre non sure, ask yourself: as the firm levers up (uses more than debt financing), do the returns to equity (equity CFs) go bad 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 argon the preceding(prenominal) derived?? - The dividend yield regularity: D1/P + g.

Uses? Limitations? 4. Key Issues from article: shell Practices CASE NOTES: TELETECH The primal issues to hide in this case are largely well-defined. However, you should curb that your handling includes the following: 1. How does Teletech currently use the hurdle rate? (9.3%) become to business sector rate. Are in that observe any problems? What would be the program line for maintaining one hurdle rate? 2. Estimate the segment WACCs for Teletech (see video display 1); identify assumptions as appropriate. 3. exemplify R. Phillipss graph (Fig 2). Discuss how the choice of hurdle pass judgment (constant vs risk adjusted) affect the paygrade of Teletechs two segments....If you pile to get a in force(p) essay, order it on our website: Ordercustompaper.com

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