The Boeing Corp is considering building a new aircraft, the 787--larger than the 747 and larger than the Airbus A380. The company's Renton WA Facility, where 747s are currently manufactured, would have to be expanded
Expansion costs are forecast to be $2.5B, incurred at t = 0. Also at time t = 0, before production begins, inventory will be increased by $1.855B. Assume that this inventory is sold at the end of the project at t = 2. The first sales from operation of the new plant will occur at the end of year 1 (t = 1 ). Boeing forecasts sales of 220 planes in each of the two years. The plane will be sold for $130M each. The cost of manufacturing a plane is $115M. Annual overhead expenses are $775M. The construction facilities are classified as 15 year property. When the plant is closed it will be sold for $1B. The company is in the 34% marginal tax bracket. Boeing's cost of capital is 12%. What are the operating cash flows at the end of Year 1 (t = 1 )?
MACRS Depreciation Rates
Year 10-Year 15-Year
1 10.00% 5.00%
2 18.00% 9.50%
3 14.40% 8.55%
A) $1,584M
B) $1,709M
C) $1,945M
D) $2,400M
E) $2,525M
B
You might also like to view...
In the modern holiday ritual of Christmas, the figures of Christ and Santa can be seen as binary opposites; one promotes selflessness while the other promotes materialism
Indicate whether the statement is true or false
The acceptable level of detection risk is inversely related to the:
A. risk of failing to discover material misstatements. B. risk of misapplying auditing procedures. C. overall materiality. D. extent of the substantive procedures.
A leader with an inclusive mindset will set the example for his followers that ______.
a. inappropriate actions toward a female or ethnic group member are not to be tolerated b. both in-group members and out-group members are welcome c. neither the glass ceiling nor the glass cliff will be tolerated d. both formal and informal leadership will be included in his/her leadership behaviors
Bernard, a senior manager at Duepoint Inc., manipulates his subordinates to gain personal benefits by promising them false rewards. Bernard's personality trait is an example of
A. self-esteem. B. conformity. C. Machiavellianism. D. authoritarianism. E. risk propensity.