TELETECH CASE 15

1. How does Teletech Corporation currently use the hurdle rate?
2. Please estimate the segment WACCs for Teletech (see worksheet Exhibit 1).
As you do this, carefully note the points of judgment in the calculation.
3. Interpret Rick Phillips’s graph (Figure 2).
How does the choice of constant versus risk-adjusted hurdle rates affect the
evaluation of Teletech’s two segments? What are the implications for
Teletech’s resource-allocation strategy?
4. Do you agree that “all money is green”? What are the implications of that
view? What are the arguments in favor and against it?
5. Is Buono right that management would destroy value if all the firm’s assets
were redeployed into only the telecommunications business segment? Why
or why not? Please prepare a numerical example to support your view.
6. Has Products and Systems destroyed value? What evidence or illustrations
can you give to support your opinion?
7. What should Teletech say in response to Yossarian?
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