In 2003, The Boeing Company announced that a new “super-efficient” commercial jet as “7E7” or build “Dreamliner”. This was a “bet the farm” gamble by Boeing, similar in size to its previous launches of the 747 and 777 aircraft. The technological superiority of the new cell and the fact that it argued penetrate a rapidly growing market segment for the approval of the project. On the other hand, the current market for commercial aircraft which terrorism was depressed, … Read more »

In 2003, The Boeing Company announced that a new “super-efficient” commercial jet as “7E7” or build “Dreamliner”. This was a “bet the farm” gamble by Boeing, similar in size to its previous launches of the 747 and 777 aircraft. The technological superiority of the new cell and the fact that it argued penetrate a rapidly growing market segment for the approval of the project. On the other side of the current market for commercial aircraft has been pressed, what threat of terrorism, war and SARS, a contagious disease, leading to global travel warnings. Boeing board of directors would have these considerations in granting final approval to the project, the rate of return required to go 7E7 project against a financial standard that investors weigh the task for students. The case is internal rate of return (IRR) for the 7E7 project under base case and alternative forecasts. The students have to estimate a weighted average cost of capital rate (WACC) for the Boeing commercial aircraft business to these IRRs. As a result of this analysis, students identify the “value drivers” and to distinguish, on a qualitative basis, the main playful Boeing makes. The general aim 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 their abilities to criticize various estimates of beta and manipulate the levered beta formulas. Boeing competes in both the aircraft and defense, thus the derivation of the corresponding benchmark WACC for the 7E7 project requires the isolation of the commercial aircraft component of overall corporate WACC Boeing. The students participate in the concept of value additivity.
This is a Darden case study.
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from
Robert F. Bruner,
James Tompkins
Source: Darden School of Business
25 pages.
Release Date: 29 July 2004. Prod #: UV0281-PDF-ENG
The Boeing 7E7 HBR case solution