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MINICASE Getting off the Ground at Boeing

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MINICASE Getting off the Ground at Boeing When the Boening Corporation announced its inmtemntion to builda new plane, the poject was am eourmous undertaking. Research and development had already negun two and a half years erlier, and Boening had already spent $873 million. Aggregate development ocst, diregarding the time value of momey, was expected to ne bnetween $4 billion and $5 billion. Producation facilities and personnel traning would require an additiomnal imvestment of $2.0 billion, and they would need $1.7 billion in working capital when deliveries began in six years. The followimg table shows projected future cash flows for the project at the time of Boeing’s announcement. Boeing cost of capital was 18% 18% Cash Flow Projections fo r the Boeing Project (Dollar Amounts in Millions) After Tax Profit Depreciation Capital Expenditures After Tax Profit Depreciation Capital Expenditures Year 1 ($597.30) $40.00 $400.00 Year 18 $1,691.19 $129.20 $178.41 Year 2 ($947.76) $96.00 $600.00 Year 19 $1,208.64 $96.99 $627.70 Year 3 ($895.22) $116.40 $300.00 Year 20 $1,954.39 $76.84 $144.27 Year 4 ($636.74) $124.76 $200.00 Year 21 $2,366.03 $65.81 $100.51 Year 5 ($159.34) $112.28 $182.91 Year 22 $2,051.46 $61.68 ($463.32) Year 6 $958.62 $101.06 $1,741.42 Year 23 $1,920.65 $57.96 ($234.57) Year 7 $1,718.14 $90.95 $2.12 Year 24 $2,244.05 $54.61 $193.92 Year 8 $1,503.46 $82.72 ($327.88) Year 25 $2,313.63 $52.83 $80.68 Year 9 $1,665.46 $77.75 $67.16 Year 26 $2,384.08 $52.83 $83.10 Year 10 $1,670.49 $75.63 ($75.21) Year 27 $2,456.65 $52.83 $85.59 Year 11 $1,553.76 $75.00 ($88.04) Year 28 $2,531.39 $52.83 $88.16 Year 12 $1,698.99 $75.00 $56.73 Year 29 $2,611.89 $47.52 $90.80 Year 13 $1,981.75 $99.46 $491.21 Year 30 $2,699.26 $35.28 $93.53 Year 14 $1,709.71 $121.48 $32.22 Year 31 $2,785.50 $28.36 $96.33 Year 15 $950.83 $116.83 $450.88 Year 32 $2,869.63 $28.36 $99.22 Year 16 $1,771.61 $112.65 $399.53 Year 33 $2,956.28 $28.36 $102.20 Year 17 $1,958.48 $100.20 ($114.91) Year 34 $3,053.65 $16.05 $105.26 NPV $1,065.25 NPV $10,634.89 IRR 25% IRR QUESTIONS: 1 Calculate the NPV, IRR and payback for the project? 2 On the basis of your analyusis, do you think Boeing should have continued with this project?Explain your reasoning in detail, apx 200-200 words. With sites and supporting resources Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help

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