This plane will be a formidable competitor to the 7E7. Adding this versatility will give the 7E7 owner more options for travel routes. The weighted average cost of capital WACC was calculated to be Add this document to collection s. This would earn a IRR of
A decrease in business travel has occurred due to cost and the advance of conferencing technologies. The 7E7 is the first plane to use a carbon body construction and employ wingtip extenders. Suggest us how to improve StudyLib For complaints, use another form. The supply chain is very large and spread over the globe. Due to the large beta, investors should expect greater returns than the stock market is providing.
Boeing would need to earn at Boeing 7E7 Page 3 least The supply chain is very large and spread over the globe. This will help command a larger share of the market. It did not quite all come together perfectly at the end.
Boeing showcases diversity initiatives at World Bank meeting. 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.
The Boeing 7E7
After carefully considering the risks and benefits of the 7E7project, we recommend that the Board of Directors approve the project. Caase 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.
This would earn a IRR of The 7E7 project would need to provide returns of The Equity beta for the whole company and for the commercial division is calculated in the appendix. If Boeing falls behind regarding innovation, fuel stuvy and all the other attributes of a long haul airliner they will lose their market share.
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.
We used the rate of 5. 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.
Boeing 7E7 Page 6 There are, however, inherent risks in this project resulting from the design and materials used.
What is an appropriate required rate of return against which to evaluate the prospective IRRs from the Boeing 7E7?
Upload document Create flashcards. What Beta did you use and how did you derive it? The market competition corroborated with the unfavorable economic conditions prompt a swift and decisive answer from Boeing.
In this case it was calculated to be 7. The 21 month beta period began September 17, The weighted average cost of capital WACC was calculated to be Which capital-structure weights did you use? That ups our costs to Optimistic Best case scenario includes a cost of capital that is lower than expected. This will add risk to the project since they have never been used on such a large scale project.
The success of the expandable wing will also give the plane attractive versatility.
With a beta of 2. Management Summary The analysis identifies both risks and benefits associated with undertaking the 7E7 project. Airbus is a close competitor.
Boeing 7E7 case study by Aaron Casey on Prezi
This is therefore the risk free rate that we will use for our calculations. For complaints, use another form.
Bio on George Buswell. The case gives us the rates of the 3-month Treasury Bill and the 30 year Treasury Bond at 0.