Case Study of Boeing's Decision to Develop the 777

1299 Words May 15th, 2014 6 Pages
Case Study of Boeing's Decision to Develop the 777
1. What is an appropriate required rate of return against which to evaluate the prospective IRRs from the Boeing 777?
1a. which beta did you use? Why?
1b. if you used the CAPM, which risk premium and risk free rate did you use? Why?
1c. which capital-structure weights did you use? Why?
Answer:
i. Key Assumptions for the Calculation:
In order to calculate the appropriate rate of return against which to evaluate the prospective cash flows from the Boeing 777 project, several assumptions had to be made.
First, in order to facilitate the calculations, I referred to betas from Exhibit 9 and selected the value for Boeing calculated in comparison to the S&P 500 Index for the
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Given