Minicase 3 Boeing vs. McDonnell Douglas Boeing and McDonnell Douglas are two leaders in the manufacture of aircraft. In 1996 Boeing announced intentions to acquire McDonnell Douglas and create one huge corporation. Competitors, primarily Airbus of Europe, are very concerned that they will not be able to compete with such a huge rival. In addition, customers are concerned that this merger will reduce the number of suppliers to a point where Boeing will be able to dictate prices. Provided below are figures taken from the 1995 financial statements of Boeing and McDonnell Douglas, which allow a comparison of the operations of the two corporations prior to their proposed merger.

\section*{Instructions}

(a) Which company has older assets?

(b) Which company used a longer average estimated useful life for its assets?

(c) Based on the asset turnover ratio, which company uses its assets more effectively to generate sales?

(d) Besides an increase in size, what other factors might be motivating this merger?

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($ in millions) Total revenue Boeing McDonnell Douglas $19,515 Net income (loss) 393 Total assets 22,098 $14,322 (416) 10,466 Land 404 91 Buildings and fixtures 5,791 1,647 Machinery and equipment 7,251 2,161 Total property, plant, and equipment (at cost) 13,744 3,899 Accumulated depreciation 7,288 2,541 Depreciation expense 976 196