Boeing 7e7

Since 1994, Boeing, which used to be the world’s leading producer of commercial airplanes, has not seen any substantial gains in the commercial aircraft market. In fact, Airbus has been taking over the commercial aircraft market, creating new airlines to compete with us. Recently, they have announced that they will be creating a new, larger commercial aircraft, the largest ever be built. In order to compete with this new development by our rivals, we need to come up with a plan that will help boost our commercial aircraft market once again. Michael Bair has recently told the Board of Directors of a new project that will help to fix our problem. He has drawn up some plans for a new aircraft called the 7E7, or the “Dreamliner.” “E” standing for Efficiency. We are here today to evaluate the specs of this project and determine if the project will offer us a new leap into the commercial airplane market once again. In order to determine if this project is a great investment for our company, we will be estimating a weighted average cost of capital and compare that to the internal rate of return we wish to achieve, and estimate on keeping the 7E7 costs down as low as possible. In order to go ahead with this project, using varying inputs based on differing market conditions, we would like to see if our estimation of the weight average cost of capital is lower than the internal rate of return. First, we will discuss how to get the WACC…

Beta measures how the Return on an Individual Company’s Stock will Vary in Relation to the Market Portfolio Return.

The Case provided us with 1.62 as the Estimated Levered Beta for Boeing’s entire operations, calculated against the New York Stock Exchange composite index for 60 trading days.

Boeing’s Operations include both commercial and defense divisions. We need to ISOLATE the Commercial Division from the Defense Division.

The company-wide Beta does not take into account the Separation of the Higher Risk involved with the...