How to calculate the sensitivity analysis and beta on the boeing 7e7 case?

Key numbers required for case analysis ( for quick reference) ($ in millions)

Initial Price of 7E7 planes = $136.95

Initial Price of 7E7 Stretch planes = $170.87

COGS = 80%

Working Capital = 6.70%

GS&A Expenditure = 8%

Inflation = 2%

Depreciation factor = 150%

R&D Expenses ( Excluding 2004- 2007) = 2.3%

Capital Expenses ( Excluding 2004- 2007) = 0.16%

Initial Development Cost (2004 - 2009) = $8,000.00

IRR = 15.66%

---------------------updated on 12/04---------------------------------

For feasibility analysis we would need WACC to find out NPV and IRR to see if the project is an economically feasible one.

WACC = weightage of debt *(Rd)*(1-t)+Weightage of equity*(Re)

Using data provided in Exhibit 11 after excel calculation the total market value of debt is $ 5022.12 million. The Weighted average yield to maturity is 5.335%

With data made available in exhibit 10 we would be able to calculate the cost of equity. Because this project is long term, therefore we should recommend to use 60 months beta values for all of the companies, however, the pointer have specified to use 60 trading days beta for the calculation, therefore 1.62 will be the number that were going to use in our calculation below.

Unlevered beta = Levered Beta/(1+(1-t) D/E)

Tax rate is given at 35% for all companies, and debt to equity (D/E) ratio has been given as 52.5%

Unlevered Beta (Boeing) = 1.62/(1+(1-35%)*52.5%) = 1.21

D/E ratio Lockheed Martin @ 41%, levered equity beta @ 0.37

Unlevered Beta(LM) = 0.37/(1+(1-35%)*41%)= 0.22

D/E ratio Northorp Grumman @ 64%, levered equity beta @ 0.30

Unlevered Beta(NG) = 0.30/(1+(1-35%)*64%)= 0.146

Avg. Unlevered beta for defense industry

(0.388+0.311+0.419)/3 = 0.183

0.183 will be the beta used as the beta for boeing integrated defense system segments beta.

Unlevered beta (Boeing) = %commercial*Unlevered beta commercial + %defense*unlevered beta defense

Exhibit 10 indicate 46% are in defense, making the remaining 54% in commercial

Unlevered beta Boeing commercial = (1.21 46%*0.183)/54% = 2.085

Levered beta Boeing commercial = 2.085*(1+(1-0.35)*52.5% )= 3.891

Risk-free rate is given @ 0.85%, Risk premium is 8.4%

Re= 0.85% + 3.891*8.5% =33.355%

Pretax cost of debt to be used is 5.33% in WACC calculation

WACC = (E/V x Re) + ((D/V x Rd) x (1 T))

Where:

E = market value of the firms equity (market cap)

D = market value of the firms debt

V = total value of capital (equity plus debt)

E/V = percentage of capital that is equity

D/V = percentage of capital that is debt

Re = cost of equity (required rate of return)

Rd = cost of debt (yield to maturity on existing debt)

T = tax rate

Is there anything else needed to help me answer this?