16 Pages Posted: 21 Oct 2008
In October 2005, the chief financial officer of a telecommunications company must fashion a response to a corporate raider who claims that a major business segment of this company should be sold because it is not earning a satisfactory rate of return. The case recounts the debate within the company over the use of a single hurdle rate to evaluate all segments of the company versus a risk-adjusted hurdle-rate system. The tasks for the student are to resolve the debate, estimate the weighted-average costs of capital (WACC) for Teletechâ¬"s two business segments, and respond to the raider. The case was prepared to serve as part of an introduction to estimating investorsâ¬" required rates of return. It would best follow one or two class sessions introducing techniques for estimating WACC. The numerical calculations required are light, though some of the subtleties about the use of risk-adjusted hurdle rates will require time for the novice to absorb.â¬?
Keywords: cost of capital
Suggested Citation: Suggested Citation
Bruner, Robert F., Teletech Corporation, 2005. Darden Case No. UVA-F-1485. Available at SSRN: https://ssrn.com/abstract=909917