Teletech-corporation-1996(讯科公司-业务部门的风险与回报权衡)PPT优秀课

Question Five:
significance of performance
Company goal is to give
evaluation.
Each year, the segment and business unit executives were measured on the basis of economic profit.
The Equation NPV = ∑nt=1[Free Cash Flowt /(1+Hurdle Rate)t]- Initial Investment
n Four:
Questi
Multiple hurdle rate is easy to confuse investment and
Question Two:
ons
financing.
Using the multiple hurdle rate
will lose more comparison between departments with the
Use the equation to assess the capital-investment proposals
9
FINANCIAL ANALYSIS 财务分析
CFO: Margaret Weston
WHAT IS
HURDLE RATE
10
FINANCIAL ANALYSIS 财务分析
CFO: Margaret Weston
The Measure Economic profit= (ROC – Hurdle Rate) * Capital Employed
Where, ROC = Return on Capital = NOPAT/ Capital NOPAT = Net Operating Profit After Taxes
7
FINANCIAL ANALYSIS
CFO: Margaret Weston
姚辉
8
FINANCIAL ANALYSIS 财务分析
CFO: Margaret Weston
The Mission We will create value by pursuing business activities that earn premium rate of return.
It is difficult to assess the debt
Question One:
ability.
Multiple hurdle rate is based on the
cost of capital rather than a strategic
consideration, errors may occur.
Where:
Wdebt = Weight of Debt, Wequity = Weight of Equity RB = Bond Rates , RM= Market Rates, Rf =Risk-free Rate β = Company stock's beta coefficient T = Tax Rate
Weakness
Lowly Growth Rate Industry regulated
Threaten
Tax cuts delayed New competitors to enter
Opportunity
The industry is evolving
CEO: Maxwell Harper
8.00% 6.00% 4.00% 2.00% 0.00%
RM-Rf
TS 4.20%
10.66%
7.% 40% 0.84 5.5% 9.19%
P&S 4.67%
14.29%
7.78% 40% 1.5 5.5% 13.96%
Teletech 4.22%
11.77%
7.03% 40% 1.04 5.5% 10.41%
maxwellharpertelecommunicationsservicessegmentproductsandsystemssegmentstrength?????mainsuppliersforregionalmarkethighlysatisfactionstablyreturnsafelyinvestmentlowercostweaknessstrength??technologyleaderhighergrowthrateweakness????widelyinvestmenthighcostoffinancinghighriskhighrisk??lowlygrowthrateindustryregulatedthreaten??taxcutsdelayednewcompetitorstoenteropportunity?theindustryisevolvingthreaten??elasticityisverybigpowerfulforeigncompetitorsopportunity?thepotentialvalueisinfinitebusinessanalysis经营分析ceo
DATA ANALYSIS 数据分析
Shareholder: Victor Yossarian
billion
The Profit
The Rate
18
16
14
12
10
8
6
4
2
1.18
0 TS
0.48 P&S
1.66 Teletech
16%
14%
12% 10.35%9.80%
10%
9.19%
8%
6%
4%
Opportunity
The potential value is infinite
6
BUSINESS ANALYSIS 经营分析
Market Value
Growth Rate Bond
Weightings Rate of profit
The beta
Business Date
TS 75% 3% 22.80% 10.73% 0.84
Products and Systems segment
Strength
Technology leader Higher Growth Rate
Weakness
Widely investment High cost of financing High Risk
Threaten
Elasticity is very big Powerful foreign competitors
4
BUSINESS ANALYSIS
CEO: Maxwell Harper
许子华
5
BUSINESS ANALYSIS 经营分析
Telecommunications Services segment Strength
Main Suppliers for regional market Highly Satisfaction Stably Return Safely Investment Lower Cost
14
P&S’S OPINION
VP: Helen Buono
王之祥
15
P&S’S OPINION 部门观点
Use the one hurdle rates
VP: Helen Buono
Based on a one hurdle rate, investors can more easily judgment.
11
FINANCIAL ANALYSIS 财务分析
CFO: Margaret Weston
Present situation
Cost of Debt
Cost of Equity
RWACC
Bond Rating
Tax Rate β
RM-Rf RWACC
Cost of Debt 16.00% 14.00% 12.00% 10.00%
-0.1
-0.15
-0.2
✓ Truly and fairly reflect the performance of each segment ✓ To reduce the cost of financing ✓ In the long run more truly reflect the capital-structure ✓ Help to promote the financing
It seems that the multiple hurdle rates are the better ,but also have some
questions.
姚辉
17
Margaret Weston’s Concerns The Questions
CFO: Margaret Weston
Question Three:
Hurdle Rates
This rate was based on an estimate of Teletech’s weighted average cost of capital (WACC).
The calculation
Hurdle Rates = RWACC=Wdebt*Rdebt+Wequity*Requity = Wdebt*RB (1 – T)+ Wequity * [(RM-Rf) β+Rf]
Assistant Margaret Weston Bernard Ingles
TS VP
P&S VP
Rick Phillips Helen Buono
Personage Introduction
人物介绍
2
DATA ANALYSIS
Shareholder: Victor Yossarian
贺智琼
3
Cost of Equity Bond Rating
The firm’s hurdle rate is raised by the P&S segment. In present situation, we use the single hurdle rate of firm as whole to estimate the performance of each segment. It is indeed unfair for the low-risk segment. The performance was deprived by the high-risk segment.
CEO: Maxwell Harper
P&S 25% 40% 3.45% 9.60% 1.5
Conclusion:
The market situation of the two segments are completely different, the business risk, capital structure is also different, so expected return is different, the greater the risk, the expected return is higher , the smaller the risk, the expected return is the lower.
2%
0% TS
13.96%
12.00% 10.43%
10.37% 10.41% 10.35%
P&S
Teletech
Revenues Net assets NOPAT
ROC(1995) IRR WACC
The suggestion
Although the NOPAT of P&S segment was 0.48 billion last year, it’s WACC was 13.96% which is higher than the IRR 12% and the ROC 10.43%. So the economic profit will be lost, and it make the firm’s shares can not keep pace with the overall stock market indices. The firm is misusing its resources and not earning an adequate return. And it will be better if you abandon its misguided entry into computers, and sell the P&S Segment.
TELETECH CORPORATION,
1996
--- Business segments and risk-return trade-offs
1
CASE ANALYSIS 案例分析
Shareholder
Victor Yossarian
Teletech’s Managers
CEO
CFO
Maxwell Harper
Companies to raise money is based on the overall outlook and record
Single hurdle rate can direct funds into the department offers a high return
16
Margaret Weston’s Concerns
TS
P&S
Teletech
12
TS’S OPINION
VP: Rick Phillips
解辉
13
TS’S OPINION 部门观点
VP: Rick Phillips
Advocate the multiple rates
0.15
0.1
0.05
0 TS
-0.05
P&S
Teletech
E-Profit(adjust) E-Profit(befor)