Finance

THE MARKETS FOR TS AND P&S
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The ideal situation is to find several competing companies and judge
the important or capital market risk for them. Considered to be the best
steering to judge company-related risk, this is still an imperfect process.
Even taking dickens closely-competitive semiconductor companies such as
Intel (NASDAQ: INTC) and Advanced Micro Devices (NYSE: AMD), youll
find many things are the same (percent of R&D spending; revenue margins
on major product lines; percent of sales & selling spending). -- and
youll find many things different (share of microprocessor markets;
markets for new product reading; customers; capital structure).

Bernard Ingles memo to CFO Margaret Weston in the Teletech case makes
diagnose of this in his last point but really makes no mention of what
companies would provide likely comparisons -- or if the companies are
publicly-traded.

In terms of equity, we turn in only that the company has a low aggregate
beta of 1.04. However, we do have a good idea of what debt risks are
-- and the deal of capitalization thats allocated to
Telecommunications Services (TS) and Products & Services (P&S):
Debt: 18%
Equity: 82%

TS Capital: 75% ($1.18 billion)
P&S Capital: 25% ($4.1 billion)

TS cost of debt: 7.00%
Corporate cost of debt: 7.



03%

Knowing the weighted averages, we know too that:
P&S cost of debt: 7.12% (as its 25% of the portfolio).

Returns universe required by the splice holders allow us to propose a
beta on the debt:

rD = rF + Bd * (rM-rF)

where,
rD: return required by market
rF: the risk-free or T-bill rate
Bd: beta for the debt
rM-rF: Teletechs bond premium

So, the bond beta, Bd, for Telecom Services (TS) is:
7.0 = 6.04 + Bd * (5.5)
Bd = .17

And the bond beta, Bd, for Products & Services (P&S) is:
7.12 = 6.04 + Bd*(5.5)
Bd = .20

Neither beta is particularly risky, indicating the believe that debt
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