CASE STUDY BOEING 7E7
You can add this document to your saved list Sign in Available only to authorized users. Boeing would need to earn at Boeing 7E7 Page 3 least Due to the length of the Boeing project, at first glance it would appear a beta calculated using a longer regression period would estimate future returns best. It did not quite all come together perfectly at the end. Staff Analyst 2 — The Boeing Company. Airbus is a close competitor. This will lead to challenges managing this network of contractors.
Suggest us how to improve StudyLib For complaints, use another form. Boeing would need to earn at Boeing 7E7 Page 3 least Boeing had to determine what the decide what the underlying variables were which in this case happen to be development costs and the per-copy costs to build the 7E7. Staff Analyst 2 — The Boeing Company. For example, we used a market expectation of After carefully considering the risks and benefits of the 7E7project, we recommend that the Board of Directors approve the project.
Should the board approve the 7E7?
Optimistic Best case scenario includes a cost of capital that is lower than expected. 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.
In this case, the extended length of the regression period is a detriment to the calculation of future risk. Which capital-structure weights did you use? This is therefore the risk free rate that we will use for our calculations.
There is an awful lot of good work in the construction of this document: 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 Boeing 7E7
A reverse of this trend is crucial to reach some of the projected sales numbers that Boeing is counting on. For example, we used a market expectation of The 7E7 project would need to provide returns of The expected rate of return of a market portfolio of stocks is estimated at Since this project has a time horizon on the order of years it would be very reasonable to use the year Treasury Bond as the value for the risk free interest rate.
If Boeing falls behind regarding innovation, fuel efficiency and all the other attributes of a long haul airliner they will lose their market share. For example, a rate of 3.
Boeing had to determine what the decide what the underlying variables were which in this case happen to be development costs and the per-copy costs to build the 7E7. It is crucial that the new 7E7 delivers on its promise of lower operating 7e.
Boeing 7E7 case study by Aaron Casey on Prezi
The Equity beta for the whole company and for the commercial division is calculated in the appendix. This will add to the inherent risk of the boekng if any of these contractors fail to deliver on time. Add this document to collection s.
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Add to collection s Add to saved. The equity market risk premium should equal the excess return expected by investors on the market portfolio.
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. This would earn a IRR of Due to the large beta, investors should expect greater returns than the stock market is providing.
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 boeng and long flight routes. The 7E7 is the first plane to use a carbon body construction and employ wingtip extenders. If the market expectations underperform, we can also lower our estimates of Boeing 7E7 Page 5 cost of capital.
Bio on Casr Buswell. Boeing 7E7 Page 6 There are, however, inherent risks in this project resulting from the design and materials used. After boeig considering the risks and benefits of the 7E7project, we recommend that the Board of Directors approve the project. A beta of 2 instead of 2. You can add this document to your study collection s Sign in Available only to authorized users. Boeing showcases diversity initiatives at World Bank meeting.