Case Solution for Phon-Tech Corporation

Complete Case details are given below :

Case Name :      Phon-Tech Corporation
Authors :           Robert F. Bruner
Source :             Darden School of Business
Case ID :           UV0080
Discipline :        Finance
Case Length :    14 pages
Solution Sample availability : YES
Plagiarism : NO (100% Original work)
Description for case is given below :
Students must estimate the weighted-average cost of capital (WACC) for two business segments and resolve the debate within a company over the use of a single hurdle rate versus a risk-adjusted hurdle rate performance evaluation system. In January 1996, Phon-Tech’s CFO must fashion a recommendation regarding the company’s use of segment hurdle rates. Phon-Tech had been the target of an active investor who charged that one segment was not paying its way. The case serves as part of an introduction to estimating investors’ required rates of return (ROR). It would best following 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.
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