Question
In a recent study (January 2019) by the NYU Stern School of Business, the average cost of capital for a company in the Aerospace and
In a recent study (January 2019) by the NYU Stern School of Business, the average cost of capital for a company in the Aerospace and Defense Industry is 8.72%. So for every $1 raised through all sources of financing, the company gives out (or pays) about 8.72 cents to its investors (i.e., bondholders, banks, common stockholders).
Lets say that an Aerospace company such as Boeing has a cost of capital similar to an average company in its industry. Keep in the mind the role of the cost of capital and how managers use that number and whether that number is changing for Boeing.
Discuss in one or two pargaraphs if you think the following potential capital projects would be undertaken (i.e., invested in) given Boeing's year thus far. Technology Improvement Project with projected Rate of Return of 9%; Refurbishing of Planes Project with projected Rate of Return of 7.5%; and New Plane Model Production with projected Rate of Return of 11%.
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