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. 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. The supply chain is very large and spread over the globe. However, if yield to maturity rates are lower than expected, we can lower the WACC. The 7E7 will carry more passengers per flight in a fuel efficient manner allowing the airline companies to justify purchasing the plane. With the economy so volatile, airlines will be looking for options that reduce their operating costs.
Both ended June 16, Add to collection s Add to saved. Should the board approve the 7E7? This plane will be a formidable competitor to the 7E7. Which capital-structure weights did you use?
The Boeing 7E7
What Beta did you use and how did you derive it? 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.
This would earn a IRR of The Equity beta for the whole company and for the commercial division is calculated in the appendix.
Boeing 7E7 Project Evaluation Circumstances for an economically attractive project The project would stduy economically attractive if Boeing could sell enough planes in a given time period above a certain price.
A decrease in business travel has occurred due to cost and the advance of conferencing technologies. Suggest us how to improve StudyLib For complaints, use another form.
With a beta of 2. For example, we used a market expectation of The success of solytion expandable wing will also give the plane attractive versatility.
Boeing 7E7 case study by Aaron Casey on Prezi
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.
Cost of Equity The 7E7 Project is a risky project. 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 60 month beta regression period began June 16, Bio on George Buswell. This will lead to challenges managing this network of contractors.
You can add this document to your study collection s Sign in Available only to authorized users. Adding this versatility will give the 7E7 owner more options for travel routes. The weighted boeng cost of capital WACC was calculated to be For complaints, use another form. See the detailed comments that I have made in the RHS margin. The 21 month beta period began September 17, Boeing had to determine what the decide beoing the underlying variables were which in this case happen to be development costs and the per-copy costs to build the 7E7.
If the market expectations underperform, we 7s7 also lower our estimates of Boeing 7E7 Page 5 cost of capital. The 7E7 is the first plane to use a carbon body construction and employ wingtip extenders.
This is therefore the risk free rate that we will use for our calculations. Add to collection s Add to saved. The 7E7 project would need to provide returns of Risk Free Rate US government debt is considered risk free as there is a miniscule beoing, very near zero, that the US government will become insolvent.
Due to the large boing, investors should expect greater returns than the stock market is providing. The case gives us the rates of the 3-month Treasury Bill and the 30 year Treasury Bond at 0. 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.
That ups our costs to We have decided to use the Year Treasury Bond as the risk free return because it most closely mimics ztudy time horizon of the 7E7 project. The 7E7 will carry more passengers per flight in a fuel efficient manner allowing the airline cae to justify purchasing the plane.