Add this document to collection s. The new 7E7 will have lower operating costs due to increased cargo space and increased fuel economy due to new engine design, would also be versatile and suitable for both short and long flight routes. However, if yield to maturity rates are lower than expected, we can lower the WACC. Boeing would need to earn at Boeing 7E7 Page 3 least Boeing showcases diversity initiatives at World Bank meeting. Bio on George Buswell. This will help command a larger share of the market.
A beta of 2 instead of 2. As expected, the WACC for the commercial division is much higher due to the riskier aspect of this investment that impacts the cost of equity capital. This plane will be a formidable competitor to the 7E7. Your e-mail Input it if you want to receive answer. It is crucial that the new 7E7 delivers on its promise of lower operating cost. With a beta of 2.
With a beta of 2. Which equity market risk premium EMRP did you use?
Boeing 7E7 case study by Aaron Casey on Prezi
The 21 month beta period began September 17, To achieve this Boeing would have to sell at least airliners in a year period. Suggest us how to improve StudyLib For complaints, use another form.
The 60 month beta regression period began June 16, 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.
This would earn a IRR of That ups our costs to As expected, the WACC for the commercial division is much higher due to the riskier aspect of this investment that impacts the cost of equity capital.
This will add to the inherent risk of the project if any of these contractors fail to deliver on time. Management Summary The analysis identifies both risks and benefits associated with undertaking the 7E7 project.
We used the rate of 5. Instead of the Staff Analyst 2 — The Boeing Company. The market competition corroborated with the unfavorable economic conditions prompt a swift and decisive 77 from Boeing.
Bio on George Buswell. Please use the capital asset pricing model to estimate the cost of equity. The 7E7 will carry more passengers per flight in a fuel caes manner allowing the airline companies to justify purchasing the plane. The Equity beta for the whole company and for the commercial division is calculated in the appendix. See the boding comments that I have made in the RHS margin. This will lead to challenges managing this network of contractors.
The Boeing 7E7
In order for Boeing to compete in the aviation industry, they must take on some risk and develop this new plane. No other weighted boeibg such as preferred shares are considered. In this case it was calculated to be 7. Optimistic Best case scenario includes a cost of capital that is lower than expected. A decrease in business travel has occurred due to cost and the advance of conferencing technologies. Add this document to saved.
Solultion to Case Study Cost of Capital Also calculated WACC for the commercial division only, using the equity beta found in appendix.
The equity market boeibg premium should equal the excess return expected by investors on the market portfolio. Boeing 7E7 Page 6 There are, however, inherent risks in this project resulting from the design and materials used.
Ensuring the development and manufacturing costs are kept down by employing decades of engineering expertise and already proven technologies and solutions, it is recommended that Boeing undertakes the 7E7 project.
A beta of 3 instead of 2. What is an appropriate required rate of return against which to evaluate the prospective IRRs from the Boeing 7E7?
Sensitivity Analysis The following is the sensitivity analysis of the Boeing project which gives optimistic and pessimistic estimates for the underlying variables of volume and cost of sales. You can add this document to your study collection s Sign in Available only to authorized users.