CASE STUDY BOEING 7E7
The 7E7 will carry more passengers per flight in a fuel efficient manner allowing the airline companies to justify purchasing the plane. Assuming the development costs are correctly estimated and the market response is properly gauged, the reasons to go forward with the project outweigh those against it. Risk Free Rate US government debt is considered risk free as there is a miniscule chance, very near zero, that the US government will become insolvent. What Beta did you use and how did you derive it? After carefully considering the risks and benefits of the 7E7project, we recommend that the Board of Directors approve the project.
To achieve this Boeing would have to sell at least airliners in a year period. As you will find, the financial calculations provided in this report show that the project will increase the wealth of the shareholders, also identifying the associated risks and how those could be minimized. The 7E7 project would need to provide returns of However, if yield to maturity rates are lower than expected, we can lower the WACC. In this case it was calculated to be 7. The success of the expandable wing will also give the plane attractive versatility. We used the rate of 5.
The 7E7 project would need to provide returns of Boeing 7E7 Project Evaluation Circumstances for an economically attractive project The project would be economically attractive if Boeing could sell enough planes in a given time period above a certain price. A beta of 3 instead of 2.
The 60 month beta regression period began June 16, However, if yield to maturity rates are lower than expected, we can lower the WACC. Assuming the development costs are correctly estimated and the market response is properly gauged, the reasons to go forward with the project outweigh those against it.
The 21 month boejng period began September 17, Both ended June 16, This will add risk to the project since they have never been used on such a large scale project.
Add to collection s Add to saved. Please use the capital asset pricing model to estimate the cost of equity.
The equity market risk premium should equal the excess return expected by investors on the market portfolio. The Equity beta for the whole company and for the commercial division is calculated in the appendix.
Your e-mail Input it if you want to receive answer. Ensuring the development and manufacturing costs are kept down by employing decades of engineering casr and already proven technologies and solutions, it is recommended that Boeing undertakes the 7E7 project. The case gives us the rates of the 3-month Treasury Bill and the 30 year Treasury Bond at 0. With a beta of 2.
Boeing 7E7 case study by Aaron Casey on Prezi
The market caase corroborated with the unfavorable economic conditions prompt a swift and decisive answer from Boeing. Staff Analyst 2 — The Boeing Company. The weighted average cost of capital WACC was calculated to be You can add this document to your saved list Sign in Available only to authorized users. Boeing 7E7 Page 6 There are, however, inherent risks in this project resulting from the design and materials used.
The Boeing 7E7
The hurdle rate, or the internal rate of return that gives the project an NPV of zero is After carefully considering the risks and benefits of the 7E7project, we recommend that the Board of Directors approve the project.
Add this document to collection s. This is therefore the risk free rate that we will use for our calculations. This plane will be a formidable competitor to the 7E7.
They will be coming to market with their new A in You can add this document to your study collection s Sign in Available only to authorized users. Boeing is expecting to reach this unit csse The financial calculations provided in this report show that there is a very good chance that the project will increase the wealth of stuyd shareholders. In this case, the extended length of the regression period is a detriment to the calculation of future risk.
Optimistic Best case scenario includes a cost of capital that is lower than expected. The expected rate of return of a market portfolio of stocks is estimated at It is crucial that the new 7E7 delivers on its promise of lower operating cost.
To achieve this Boeing would have to sell at least airliners in a year period. What Beta did you use srudy how did you derive it?
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