Report Number 1
The problem #1 is whether a good time to doing 7E7 case or not. The problem # 2 is whether the case can make profit or not. The problem # 3 whether the project can be pulled off within a certain price range – Boeing board wants de (page 259 Paragraph 1 Start at final 258 last case) The problem # 4: what is the exactly demand of the new project Boeing 7E7. The problem # 5: why Boeing Company abandon the previous project, which they tried to develop the higher- tech. (sonic Cruiser, page 258)
Assumption 1: base on the problem # 1, I would like to give the assumption, it is a good time to launch the 7E7 (a.k.a 787) project at this time. Even on this time, United States went to war against Iraq, spams of global terrorism offered shocking headlines, and a deadly illness called SARS resulted in global travel warnings. It seems that this is the worst time to a new generation o of airplane and also airplane industry. However, in Airbus Industry section, it shows that Airbus has already had more plane orders than Boeing on 1999. And Airbus Company has enough power to replace Boeing at 2000. In 2002, Airbus received 233 commercial orders compared to Boeing’s 176 orders, representing a 57% unit market share and an estimated 53.5% dollar value market share. Because he could start collecting orders from airlines and expect passengers to start flying on the new jets in 2008. Assumption 2: is based on the problem # 2, this project is a good investment.
If we would like to figure out assumption 2 is correct or not, we should do the flowing data Analysis. If WACC < IRR, then we can launch this project. Of NPV is bigger than zero, we could launch this project as well. Analysis 1: WACC( Weighted average cost of capital) : E=10825 million, total value= 48978 million Re= Rf+β(Rm-Rf) Rf=3.52 Rm=10.23 β=1.16 (http://www.abg-analytics.com/stock-betas.shtml#.Uu65aLS2zDM) Re= 11.3 D=38153 tax rate = 34.00% Rd=6.6 WACC =11.84
Analysis 2: IRR...
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