Lockheed Case

Topics: 1902, 1895, 1900 Pages: 1 (292 words) Published: February 17, 2013
Lockheed Tristar Programme
DCF Analysis of the Lockheed Tristar Programme Assuming planned production of 210 units ($ millions) 35 Annual Production Year 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 Total t 0 1 2 3 4 5 6 7 8 9 10 Investment Production cost Revenues ($100) ($200) ($200) ($200) ($200) ($490) ($490) ($490) ($490) ($490) ($490) ($900) -2940 NPV Total Cash Flow ($100) ($200) ($200) 140 ($60) 140 ($550) 560 $70 560 $70 560 $70 560 $70 420 ($70) 420 $420 3360 ($480) ($584.05)

Lockheed Tristar Programme
DCF Analysis of the Lockheed Tristar Programme Assuming planned production of 300 units ($ millions) Production Year 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 Total t 50 Investment Production cost Revenues Total Cash Flow 0 ($100) ($100) 1 ($200) ($200) 2 ($200) ($200) 3 ($200) 200 $0 4 ($200) ($625) 200 ($625) 5 ($625) 800 $175 6 ($625) 800 $175 7 ($625) 800 $175 8 ($625) 800 $175 9 ($625) 600 ($25) 10 600 $600 ($900) -3750 4800 $150 NPV ($274.38)

Evaluation of Tri Star Programme in 1970 ($ millions)
Production Year 1970 1971 1972 1973 1974 1975 1976 1977 Total t 0 1 2 3 4 5 6 7 35 Investment Production cost Revenues ($200) ($490) ($490) ($490) ($490) ($490) ($490) ($2,940) NPV 140 140 560 560 560 560 420 420 3360 Total Cash Flow $140 ($550) $70 $70 $70 $70 ($70) $420 $220 $17.73

($200)

Assumptions
$700 million of the $900 million in pre-production cost is already sunk. Future annual slaes volume of 210 units Any deposit (Here $140 million )received already are not sunk in that they would have to be repaid if the Tristar Programme is to be cancelled.

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