Teletech Corporation, 1996

16 Pages Posted: 21 Oct 2008

See all articles by Robert F. Bruner

Robert F. Bruner

University of Virginia - Darden School of Business

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Abstract

In January 1996, the chief financial officer must fashion a response to a raider who claims that a major business segment of the company should be sold because it is not earning a satisfactory rate of return (ROR). 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 students' tasks are to resolve the debate, estimate weighted-average costs of capital (WACC) for the two business segments, and respond to the raider. Because the case was prepared to serve as part of an introduction to estimating investors' required rates of return, it would best follow one or two class sessions introducing techniques for estimating WACC. Although the numerical calculations required are light, some of the subtleties about the use of risk-adjusted hurdle rates will require time for the novice to absorb. The case can be used to pursue a variety of teaching objectives, including (1) extending risk return (i.e., mean variance) analysis to corporate finance; (2) surveying classic arguments for and against the use of risk-adjusted hurdle rate systems; (3) assessing the assumptions and limitations of risk-adjusted hurdle rate systems; (4) exercising the estimation of segment WACCs; and (5) considering possible organizational barriers to the implementation of risk-adjusted hurdle rates.

Excerpt

UVA-F-1152

Version 2.1

TELETECH CORPORATION, 1996

Raider Dials Teletech

“Wake-Up Call Needed”

says Investor

. . .

Keywords: acquisitions, capital budgeting, cost merger, mergers, performance evaluation, takeovers, valuation, gender female protagonist diversity diverse takeover

Suggested Citation

Bruner, Robert F., Teletech Corporation, 1996. Darden Case No. UVA-F-1152, Available at SSRN: https://ssrn.com/abstract=1278887 or http://dx.doi.org/10.2139/ssrn.1278887

Robert F. Bruner (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://faculty.darden.edu/brunerb/

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