Teletech Corporation Case

Yes, I agree with the statement that "all money is green" as long as the company is making a profit and with Teletech Corporation having a book value of net assets $16 million they would fit the profile, even though the company is under two segments its return on capital is looked as being one whole part. Majority of the company's capital comes from telecommunications with 75% of its market, which makes Teletech more profitable. The implications of this view is to make investors understand that they'll have a return at the hurdle rate no matter if the Product and Services is not performing as well as Telecommunication Services. The arguments in favor is that with the company under two segments (telecommunications and product and systems) its return on capital is compiled into one company; therefore it's reasonable to keep "all investments at Teletech should be judged against one hurdle rate," which is best to keep simple for the investors. Even though the Product and Services segment is not doing well now and it requires big investment, it has high return rate once it gets better in the future. The argument against this statement is that based on capital costs rather than strategic considerations might be wrong and using single hurdle rate will made the NPV results consistent, and the NPV and economic profit calculations would lose their meaning and comparability across business segments. However, it might be unfair to the department of Telecommunication Services because the services have an lower cost of equity and the risk. Therefore, separate the hurdle rates will make the rate of return increasing.

I strongly agree with the idea "all money is green". From my respective, the United States of America is a nation of equality. Everybody must be treated the same, so is their money. In fact, people always want to invest money in things that give them the best possible return with an acceptable risk. For Teletech's case, stockholders are more likely to invest money on T&S segment to increase value on equity instead of wasting money in smaller segment, which is not profitable to them. As a manager of the firm, they do not want to lose all their investors, but they also want the entire company does well. If they use the multiple hurdle for each segment, there is a possible chance that the unity in the firm may be break into pieces. Employees from different segment just care about their own jobs and not look at profits for the company in a long run. For this reason, it will cause a negative impact for the entire company.

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