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Essay on Teletech Corp Case Analysis

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Analysis

Teletech is a business process outsourcing multinational Organization, founded in 1982 by Kenneth D.Tuchman and headquartered in Englewood, Colorado. Teletech provides services for customer management, transaction-based processing, database marketing services, professional sales and eCommerce. Teletech operates in diverse industries of Automotive, Communications and Media, Financial Services, Government Services, Healthcare Services and Technology. The firm is based in 17 countries with a total of 62 delivery centers. The company is listed on NASDAQ (National Association of Securities Dealers Automated Quotations) stock exchange, which is the second largest stock exchange after the New York Stock Exchange in terms of market …show more content…

Therefore Telecommunication system segment currently earns a ROC of 9.1% but should earn a ROC of 8.55% is good performance.

Product and System’s Division segment currently earns a ROC of 11% but should earn a ROC of 11.54% is considered as poor performance.

Constant Vs. Risk Adjusted Hurdle Rate

For Telecommunication Segment

Economic Profit using a common hurdle rate
ROC=NOPAT/CAPITAL
9.1%=$1.18/CAPITAL
CAPITAL = $12.967 Billion
EP= (9.1% - 9.3%) (12.967)
EP = - $2.5934 Billion

EP using a risk-adjusted hurdle rate
ROC=NOPAT/CAPITAL
9.1%=$1.18/CAPITAL
CAPITAL = $12.967 Billion
EP= (9.1% - 8.55%) (12.967)
EP = $7.13185 Billion

The figures clearly show that Teletech is under valuing the Telecommunications division by using a common hurdle rate

For Product and Systems Divisions
EP using a common hurdle rate
ROC=NOPAT/CAPITAL
11%=$480/CAPITAL
CAPITAL = $4363.64 Million
EP= (11% - 9.3%)(4363.64)
EP = $7418.188 Million

EP using a risk-adjusted hurdle rate
ROC=NOPAT/CAPITAL
11%=$480/CAPITAL
CAPITAL = $4363.64 Million
EP= (11% - 11.54%)(4363.64)
EP = -$2.3563656 Billion

The comparison shows that Teletech is over valuing Product and Systems Division by using a

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