This data is highly skewed due to the events of September 11, and the subsequent deterioration of the airline industry. Suggest us how to improve StudyLib For complaints, use another form. The weighted average cost of capital WACC was calculated to be Add this document to collection s. Instead of the
Upload document Create flashcards. The equity market risk premium should equal the excess return expected by investors on the market portfolio. There are other risks mentioned above that must be considered but on balance the reasons to go forward with the project outweigh those against it. See the detailed comments that I have made in the RHS margin. Add to collection s Add to saved. Also calculated WACC for the commercial division only, using the equity beta found in appendix. In this case, the extended length of the regression period is a detriment to the calculation of future risk.
Boeing 7E7 case study by Aaron Casey on Prezi
Due to the large beta, investors should expect greater returns than the stock market is providing. Solultion to Case Study Cost of Capital Also calculated WACC for the commercial division only, using the equity beta found in appendix. Instead of the There are other risks mentioned above that must be considered but on balance the reasons to go forward with the project outweigh those against it.
The weighted average cost of capital WACC was calculated to be Both ended June 16, 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.
Add this document to saved. A reverse of this trend is crucial to reach some of the projected sales numbers that Boeing is counting on.
And lastly, the weak economy has vacationers thinking of local destinations answera of traveling abroad. 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.
The 7E7 will carry more passengers per flight in a fuel efficient manner allowing the airline companies to justify purchasing the plane. The 21 month beta period began September 17, Which equity market risk premium EMRP did you use? However, if yield to maturity rates are lower than expected, we can lower the WACC. The Equity beta for the whole company and for the commercial division is calculated in the appendix.
We have decided to use bowing Year Treasury Bond as the risk free return because it most closely mimics the time horizon of the 7E7 project. This is therefore the risk free rate that we will use for our calculations.
The expected rate of return of a market portfolio of stocks is estimated at Your e-mail Input it if you want to receive answer. 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. That ups our costs to Adding this versatility will give the 7E7 owner more boeint for travel routes.
After carefully considering the risks and benefits of the 7E7project, we recommend that the Board of Directors approve the project. This will lead to challenges managing this network of contractors.
The new 77 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.
Boeing showcases diversity initiatives at World Bank answere.
Giving a calculated WAAC of This would earn a IRR of Bio on George Buswell. Add this document to collection s. There is an awful lot of good work in the construction of this document: Which risk-free rate did you use?
What Beta did you use and how did you derive it?