It is crucial that the new 7E7 delivers on its promise of lower operating cost. There are several factors to these lower numbers. In this case it was calculated to be 7. We have decided to use the Year Treasury Bond as the risk free return because it most closely mimics the time horizon of the 7E7 project. Management Summary The analysis identifies both risks and benefits associated with undertaking the 7E7 project.
This plane will be a formidable competitor to the 7E7. Management Summary The analysis identifies both risks and benefits associated with undertaking the 7E7 project. There are several factors to these lower numbers. In order for Boeing to compete in the aviation industry, they must take on some risk and develop this new plane. The 7E7 will carry more passengers per flight in a fuel efficient manner allowing the airline companies to justify purchasing the plane.
Bio on George Buswell. Suggest us how to improve StudyLib For complaints, use another form. If Boeing falls behind regarding innovation, fuel efficiency and all the other attributes of a long haul airliner they will lose their market share.
The market competition corroborated with the unfavorable economic conditions prompt a swift and decisive answer from Boeing. There is an awful lot of good work in the construction bieing this document: Please use the capital asset stuxy model to estimate the cost of equity. It did not quite all come together perfectly at the end. It is crucial that the new 7E7 delivers on its promise of lower operating cost.
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Boeing 7E7 case study by Aaron Casey on Prezi
Which risk-free rate did you use? 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. 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 order for Boeing to compete in the aviation industry, they must take on some risk and develop this new plane. Management Summary The analysis identifies both risks and benefits associated with undertaking the 7E7 project.
Add to collection s Add to saved. For complaints, use another form. Giving a calculated WAAC of The 21 month beta period began September 17, Should the board approve the 7E7? No other weighted entities such as preferred shares are considered.
The Boeing 7E7
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 Equity beta for the whole company and for the commercial division is calculated in the appendix.
Boeing would need to earn at Boeing 7E7 Page 3 least Therefore the equity market risk premium is equal to 7. What Beta did you use and how did you derive it? Boeing 7E7 Page 6 There are, however, inherent risks in this project resulting from the design and materials used.
That ups our costs to Solultion to Case Study Cost of Capital They will be coming to market with their new A in 7r7 The success of the expandable wing cse also give the plane attractive versatility. Due to the large beta, investors should expect greater returns than the stock market is providing.
This will add risk to the project since they have never been used on such a large scale project.
See the detailed comments that I have made in the 7d7 margin. The case gives us the rates of the 3-month Treasury Bill and the 30 year Treasury Bond at 0.
Adding this versatility will give the 7E7 owner more options for travel routes. 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.
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