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Publication Date: July 29, Source: Darden School of Business. This is a Darden case study. In The Boeing Company announced plans to build a new "super-efficient" commercial jet called the "7E7" or "Dreamliner. The technological superiority of the new airframe and the fact that it would penetrate a rapidly growing market segment argued for approval of the project. On the other hand, the current market for commercial airplanes was depressed, reflecting terrorism risk, war, and SARS, a contagious illness resulting in global travel warnings.
Boeing's board of directors would need to weigh these considerations in granting final approval to proceed with the project The task for students is to evaluate the 7E7 project against a financial standard, the investors' required returns. The case gives internal rates of return IRR for the 7E7 project under base case and alternative forecasts.
As a result of this analysis the students identify the "key value drivers" and distinguish, on a qualitative basis, the key gambles Boeing is making. The general objective of this case is to exercise students' skills in estimating a weighted average cost of capital and cost of equity.
The need for students to estimate a segment WACC draws out their abilities to critique different estimates of beta and to manipulate the levered-beta formulas. Boeing competes in both the commercial aircraft and defense business; thus, deriving the appropriate benchmark WACC for the 7E7 project requires isolating the commercial aircraft component from Boeing's overall corporate WACC.
In doing so, students engage the concept of value additivity. If you'd like to share this PDF, you can purchase copyright permissions by increasing the quantity. The Boeing 7E7 by Robert F. Quantity price applied.
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The Boeing 7E7
Below are the available bulk discount rates for each individual item when you purchase a certain amount. Register as a Premium Educator at hbsp. Publication Date: July 29, Source: Darden School of Business.
Boeing 7E7 Case Study Solution
These include commercial and military aircraft, satellites, weapons, electronic information and communication systems, and performance-based logistics and training. Due to customers needs and requests, Boeing has expanded its product line and services. The long tradition of aerospace leadership and innovation has given the company the advantages. Its broad range of capabilities includes creating new and more efficient commercial airplane, integrating military platforms and defense systems through network-enabled solutions; and arranging innovative customerfinancing options. Nowadays, Boeing, as the top exporter of U. Besides, Boeing employs more than , people across United States and in 70 countries.