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Boeing 7e7

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Management Summary

The analysis identifies both risks and benefits associated with undertaking the 7E7 project. Giving a calculated WAAC of 15.44% for the commercial division of Boeing, the project is feasible and profitable. As you will find, the financial calculations provided in this report show that the project will increase the wealth of the shareholders, also identifying the associated risks and how those could be minimized. Assuming the development costs are correctly estimated and the market response is properly gauged, the reasons to go forward with the project outweigh those against it.
The market competition corroborated with the unfavorable economic conditions prompt a swift and decisive answer from Boeing. The new 7E7 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. 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.

Cost of Equity

The 7E7 Project is a risky project. With a beta of 2.540738, which is substantially higher than the stock market average company, volatility is expected in this investment. However, with risk comes a reward. The 7E7 project would need to provide returns of 22.7009% in order to be considered a sound investment.
E(Ri) = .0456+ 2.540738 [.117 - .0456]

E(Ri) = .0456+ 2.540738 [.0714]

E = 22.7009%
Market Risk Premium
The equity market risk premium should equal the return expected by investors on a market portfolio relative to riskless assets. We have decided to use the 30-Year Treasury Bond as the risk free return because it most closely mimics the time horizon of the 7E7 project. The expected rate of return of a

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