Exhibit 10 of the case shows the required investment over time. Assume

a) The life of the project is perpetual.

b) There is no side-effect on other aircraft models.

c) R&D costs are all expensed in 2001-2008.

d) R&D expenditure from 2009 is zero.

e) When launching A3XX, $1 billion for property, plant , and equipment will be depreciated over 10 years on a straight-line basis with zero salvage value.

f) From 2009, capital expenditures equal depreciation.

g) No additional required investment for working capital from 2009

h) Airbus starts to deliver A3XX from 2009. The number of A3XX delivering increases by an annual rate of 2% perpetually.

i) Airbus receives the full payment (in cash) of the plane when it is delivered. There is no payment before that.

j) The price per plane is $250 million and the operating margin (EBIT/Sales) is 20%.

k) The proper discount rate is 11%. The tax rate is 38%.

What is the financial breakeven number of planes Airbus needs to be delivered in 2009?

Exhibit 10 Airbus Development Expenditure by Year (S millions) Investment 2001 2002 2003 2004 2005 2006 2007 2008 Total R&D Expenditure Capital Expenditures Working Capital $1,100 $2,200 $2,200 $2,200 $1,320 50 200 $1,100 $2,600 $2,850 S2,850 $1,570 $880 0 $660 0 $440$11,000 $1,000 0 $1,000 $440$13,000 0 0 250 50 350 300 350 0 Total S930 $660 Source: Dresdner Kleinwort Benson, Aerospace and Defense Report, May 8, 2000 Exhibit 10 Airbus Development Expenditure by Year (S millions) Investment 2001 2002 2003 2004 2005 2006 2007 2008 Total R&D Expenditure Capital Expenditures Working Capital $1,100 $2,200 $2,200 $2,200 $1,320 50 200 $1,100 $2,600 $2,850 S2,850 $1,570 $880 0 $660 0 $440$11,000 $1,000 0 $1,000 $440$13,000 0 0 250 50 350 300 350 0 Total S930 $660 Source: Dresdner Kleinwort Benson, Aerospace and Defense Report, May 8, 2000