Boeing Corp. is considering building a newshort-range commuter jet. The project is code named'Sky Streak'. The plane is based on a new design and the air frame would be constructed with aspace-age material: laminated balsa. The aircraft will feature more efficient engines from General Electric usinghigh-tension elastomer.R&D costs for the project are $ 1.06

$1.06 billion. The plane will be built in theold, unused 707 assembly facility in Everett WA. Renovations for the old plant are expected to cost $ 2.55

$2.55 billion. Boeing will have to maintain an inventory of laminated balsa and other parts worth $ 210

$210 million. Assume thatR&D, renovation and inventory costs are incurred at time 0.(See project cash flowtable, below).

Boeing forecasts sales of 146

146 planes in each year at a price of $ 39.8

$39.8 million each. Production and sales will continue for three years and then the project will be terminated. The cost of manufacturing one plane is $ 27.9

$27.9 million. Fixed production costs are $ 74.8

$74.8 million per annum. Assume that all revenues and costs are incurred atyear-end. The construction facilities are considered a10-year property and will be depreciated using MACRS GDS at 200 %

200% with thehalf-year convention(MACRS depreciation rates are shown in the table LOADING...

). When the plant is closed it will be sold for 1

1 billion. Boeing's tax rate is34 %

34% and its cost of capital is 11.9 %

11.9%. Answer the questions that follow.

a. What are the initial cash flows for the SkyStreak?

b. What are the operating cash flows in the firstyear?

c. What are the terminal year cash flows(not including the operating cashflows)?

d. What is the NPV of theproject?

Homework: Chapter 10 Homework Score: 0 of 1 pt ' 4 3 of 6 (1 complete) 7 ) HW Score: 0.69%, 0.04 of 6 pts Problem 10.LO2.10 (similar to) a; Question Help Boeing Corp. is considering building a new short-range commuter jet. The project is code named 'Sky Streak'. The plane is based on a new design and the air frame would be constructed with a space-age material: laminated balsa. The aircraft will feature more efcient engines from General Electric using high-tension elastomer. R&D costs for the project are $1.06 billion. The plane will be built in the old, unused 707 assembly facility in Everett WA. Renovations for the old plant are expected to cost $2.55 billion. Boeing will have to maintain an inventory of laminated balsa and other parts worth $210 million' Assume that R&D, renovation and inventory costs are incurred at time 0. (See project cash flow table, below). Boeing forecasts sales of 146 planes in each year at a price of $39.8 million each. Production and sales will continue for three years and then the project will be terminated. The cost of manufacturing one plane is $27.9 million. Fixed production costs are $14.8 million per annum. Assume that all revenues and costs are incurred at yearend. The construction facilities are considered a 10-year property and will be depreciated using MACRS GDS at 200% with the half-year convention (MACRS depreciation rates are shown in the table a ). When the plant is closed it will be sold for 1 billion. Boeing's tax rate is 34% and its cost of capital is 11.9%. Answer the questions that follow. a. What are the initial cash ows for the Sky Streak? b. What are the operating cash ows in the rst year? c. What are the terminal year cash ows (not including the operating cash ows)? d. What is the NPV of the project? n--.:.._ a]... maul. . . , n , a. What are the initial cash ows for the Sky Streak? Calculate the initial cash ow below: (Round to the nearest integer.) (3 million) Year 0 - Cost to renovate old plant - Research and development cost (after tax) = Net purchase price +/- Change in net working capital 6$B$$ = Initial cash flow Enter any number in the edit fields and then click Check Answer. Finance 3004 Section 002 (2) Alysha Gaffney _ | 4/4/19 10:01 AM Homework: Chapter 10 Homework Save Score: 0 of 1 pt 3 of 6 (1 complete) HW Score: 0.69%, 0.04 of 6 pts Problem 10.LO2.10 (similar to) Question Help b. What are the operating cash flows in the first year? c. What are the terminal year cash flows (not including the operating cash flows)? d. What is the NPV of the project? Boeing Sky Streak Projected Cash Flows $000,000) Annual Annual Annual Fixed Time Investments Sales Revenues Costs Costs 0 3,460 146 5,811 4,073 75 146 5,811 4,073 75 146 5,811 4,073 75 a. What are the initial cash flows for the Sky Streak? Calculate the initial cash flow below: (Round to the nearest integer.) ($ million) Year 0 Cost to renovate old plant Research and development cost (after tax) $ Net purchase price +/- Change in net working capital $ = Initial cash flow $ Enter any number in the edit fields and then click Check