In order to complete this financial analysis, Bair will need to calculate Boeing’s WACC along with IRR to determine whether this is a financially worthwhile project. In order to calculate the WACC, Bair must consider the betas from Boeing’s commercial sector as well as the defense sector. One beta cannot be used for the whole company due to the vast difference in volatility between the two sectors. Once these two separate betas are calculated, they can be weighted based on the % revenue which each industry contributes to the company and then a WACC can be calculated for Boeing as a whole. This number is then compared with the IRR of the 7E7 project to determine whether the project should continue. Based on the results of this analysis, I determined that Boeing should take on the 7E7 project. All calculations are provided below.
Why is Boeing contemplating the launch of the 7E7 project? Is this a good time to do so?
Boeing is contemplating launching the 7E7 for a few reasons. The first reason is... [continues]
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