Lockheed Hbr Case

b) The decision to invest in projects increases the shareholders value of the company. This is consistent with the growth and from the NPV criteria, positive NPV of projects increases the shareholder's value.

30) Calculate the IRR for the following investment project: initial investment is $75,000; inflows are $20,000 for the next five years; required rate of return is 15%. (Round your answer to the nearest whole percentage)

1. Why would a large and complex company like Boeing employ off-the-shelf application-specific software for accounting, human resources, supply chain management and other core business processes? And why do they choose to own, host and operate all of their own software rather than to for example outsource payroll to ADP Corporation or sales force management to Salesforce.com? [list]

ii. The project should be accepted if the NPV is positive because such a project increases shareholder value.

e) Maintenance contracts - Maintenance costs should be included as incremental cash flows because they could change the NPV of the project if the maintenance costs are significantly different for each of the different projects.

Lockheed Martin is an American aerospace multinational that also specializes in defense, security and advanced technology industries. The corporation was instituted in 1995 following the merger between Lockheed Corporation and Martin Marietta (Yenne, 2000). The corporation is based in Bethesda in Maryland with global centers that specialize in different aspects of the corporation’s many operations. Currently, the corporation employs over 120,000 employees scattered across the world. Presently, Lockheed is one of the largest defense contractors in the world and enjoys almost unlimited orders across the world.

Northrop Grumman Corporation is an American global aerospace and defense technology company. Since this company’s end products affects security and lives of people in our entire nation and other nations around the globe, Northrop must insure the highest level of its goods produced. Their success is mainly a direct result of experienced management structure. With Maslow’s Hierarchy of Needs guidelines, this company attracts and keeps the best workforces by offering high compensation, benefits and perks to meet and exceed employee’s basic needs. With the security of thriving life, the staff is allowed self-direction and self-control in order to promote critical thinking and creativity. This Humanistic Perspective of emphasizing and understanding

Lockheed Martin, together with Canadian UAVs, showed how beyond visual line-of-sight (BVLOS) flights can help various operations by performing multiple BVLOS inspection flights with the Indago 2 drone at the UAV testing facility in Foremost, Alberta, Canada.

In the case of Worldwide Paper Company we performed calculations to decide whether they should accept a new project or not. We calculated their net income and their cash flows for this project (See Table 1.6 and 1.5). We computed WPC’s weighted average cost of capital as 9.87%. We then used the cash flows to calculate the company’s NPV. We first calculated the NPV by using the 15% discount rate; by using that number we calculated a negative NPV of $2,162,760. We determined that the discount rate of 15% was out dated and insufficient. To calculate a more accurate NPV for the project, we decided to use the rate of 9.87% that we computed. Using this number we got the NPV of $577,069. With the NPV of $577,069 our conclusion is to accept this

The present value of the net incremental cash flows, totaling $5,740K, is added to the present value of the Capital Cost Allowance (CCA) tax shield, provided by the Plant and Equipment of $599K, to arrive at the project’s NPV of $6,339K. (Please refer to Exhibit 4 and 5 for assumptions and detailed NPV calculations.) This high positive NPV means that the project will add a significant amount of value to FMI. In addition, using the incremental cash flows (excluding CCA) generated by the NPV calculation, we calculated the project’s IRR to be 28%. This means that the project will generate a higher rate of return than the company’s cost of capital of 10.05%. This is also a positive indication that the company should undertake the project.

4. Based on the information provided in the case, our group calculated the NPV for the project under both tax environment and tax-free condition, respectively, by using the excel spreadsheet and the NPV function. (For a detailed calculation of NPV, please refer to Appendix Under 15-yr.) According to our calculation, we have the following results: In the first case scenario, which the firm is in a tax environment (35% income tax), the NPV of the project equals to -$6,366,054.53

3. The NPV method is better because it shows the size of the project so you can see how much value a project has not just a percentage. You could have a higher percentage but a much lower value and you would still go for the lower percentage.

Lockheed Martin is a major security and aerospace company headquartered in Bethesda, Maryland. Employing over 97,000 employees worldwide, Lockheed Martin is principally focused on research, design, development, manufacture, integration, and sustainment of advanced technology systems, products, and services (Lockheed Martin at a Glance, n.d.). Lockheed Martin is organized into broad business areas to include aeronautics ($17.8 billion in 2016 sales), missile and fire control (6.6 billion in 2016 sales), rotary and mission systems (13.5 billion in 2016 sales), and space systems (9.4 billion in 2016 sales) (Lockheed Martin at a Glance, n.d.). To better understand the global giant that is today’s Lockheed Martin, a historical look at the two companies that merged in 1995 and their respective accomplishments is essential.

The entrepreneurial sprit which began the foundations of Lockheed Martin remains alive within the company today. Although, the companies’ stricter guidelines do not allow an employee to simply begin an entrepreneurial venture on their own, the company has evolved from an airplane manufacturer to an organization that is involved in everything from defense to space exploration. This massive diversification of interests was brought about by intrapreneurial ventures. It was Lockheed Martin that coined the phrase “Skunkworks”, meaning specialized teams dedicated to discovering new projects. The origin story of “skunkworks” is well known and shows the tenacity and innovation that Lockheed Martin is capable of. In 1943, an engineer named Clarence “Kelly” Johnson and a group of young engineers were asked to design and build a jet fighter to help the US Army prepare for the growing German threat. The small group was isolated and the project was kept secret operating out of a circus tent because available and private space was scarce in the Lockheed Martin facility. The group was given one hundred and fifty days to complete the project, and they completed the jet in one hundred and forty-three (Miller, 1995). This spirt of innovation and growth marked the true beginning of the boom in product development which continues to this day under the same name, but this time trademarked.

Mutually exclusive projects are another situation for which NPV must extend its approach. In such projects, the chosen project is usually one which results in the greatest positive NPV because this will produce the greatest addition to shareholders’ wealth. In the case of mutually exclusive investments, ranking becomes crucial as only