Food for Thought
As mentioned, at the beginning of the semester, we will sometimes give you some questions to think about as you analyze the case. These are not the only issues/questions/decisions in the case but are merely meant as a way to guide your thought process about this case and others. You should NOT use your write-up to merely answer these questions. As always, the write-up should be a document that guides a decision-maker.
1. How does Teletech Corporation currently use the hurdle rate?
2. Please estimate the segment WACCs for Teletech (see the worksheet in case Exhibit 1). As you do this, carefully note the points of judgment in the calculation.
3. Interpret Rick Phillips's graph (see case 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? What are the arguments against it?
5. Is Helen 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 (P+S) destroyed value? What evidence or illustrations can you give to support your opinion?
7. What should Teletech say in response to Victor Yossarian?