Teletech Corp – Paper
The Telltale Corporation used overall WAC of 9. 3% as hurdle rate to evaluate the performance of the two divisions where first division came out to be underperforming with ROCK of 9. 1 % less than WAC of 9. 3 % as compared to Dillon B that seemed to meet investors expectations with a ROCK greater than WAC. But since each division differs in risk so best practice would be to evaluate the company using the individual WAC of each division which shows us that division B is riskier than division A. . Answers on excel sheet 3. Using individual hurdle rates Telecoms unit : Since the ROCK>WAC, It means that the telecoms unit Is creating value for the investors and the level of profitability is in correct range where ROCK exceeds WAC. Product and Services Unit: Since the ROCK<WAC, It means that this unit does not generate enough value for investors and detracts from the firm’s financial health.
On the contrary the current choice of constant one rate applied across the entire firm for all divisions and projects affect the evaluation of the two segments since telecoms unit that has a 75% market value is shown to be performing badly and not meeting he standards however using the Individual hurdle rates for each unit proves it wrong and shows that product and service unite which has 25% market value falls to meet standards. N the basis of above results the company strategy should be to improve the performance of product and service unit to meet the investors expectations. 4. We do not agree with the statement that “all money is green”. We think that the investors have a right to every aspect of the company if they so choose to have It. If you think Like this than you could have one section of the company Majorca pulling own the company as a whole. Yes it does look good in the end because the dividends are still being paid out and overall the company looks good.
Just because the company looks good overall it does not mean that it is running to the best of its ability. Just think, if the product and services section of the company was deleted how much better would the company be doing? How bigger of a dividend would the company be able to pay out. Leading to happier Investors. 5. Yes, because the the business is currently losing the company as a whole money. The Product and Services division is lowering the value of the company. 6. Mr…
Historian, we have heard what you have to say about the company and it is currently being reviewed by our financial officers. We thank you for giving us this very crucial information as it may lead to the bettering of the company. The calculations take a while to fugue out and we will get back to you with them as soon as we have gone through all of the scenarios. Please be patient and understanding through this time of calculation and thank you again for bringing this to our attention.