What is your estimate of the WACC for the 7E7 Project?

Boeing's weighted-average cost of capital (WACC) could be estimated using the following well-known formula: where: rd = Pretax cost of debt capital tc = Marginal effective corporate tax rate Percent Debt = Proportion of debt in a market-value capital structure re = Cost of equity capital Percent Equity = Proportion of equity in a market-value capital structure Exhibit 10 gives information about betas and debt/equity ratios for Boeing and comparable companies. Exhibit 11 provides data about Boeing's outstanding debt issues. While Boeing's marginal effective tax rate had been smaller in the past, it currently was expected to be 35%. In June 2003, the yield on the three-month U.S. Treasury bill was 0.85%, and the yield on the 30-year Treasury bond was 4.56%. On June 16, 2003, Boeing's stock price closed at $36.41.

Exhibit II The Boeing 7E7 Outstanding Bonds of the Boeing Company as of June 2003 ($ values in millions) Debt Amount Debt Rating Coupon Maturity Price $202 Yield To Maturity A- 7.625% 2/15/2005 106.175 $298 3.911% A- 6.625% 6/1/2005 105.593 3.393% $249 A- 6.875% 11/1/2006 $175 110.614 3.475% A- 8.100% 11/15/2006 112.650 4.049% $349 A- 9.750% 4/1/2012 129.424 5.470% $597 A- 6.125% 2/15/2013 103.590 4.657% $398 A- 8.750% 8/15/2021 127.000 6.239% $300 A- 7.950% 8/15/2024 126.951 5.732% $247 A- 7.250% 6/15/2025 114.506 6.047% $249 A- 8.750% 9/15/2031 $173 131.000 6.337% A- 8.625% 11/15/2031 138.974 5.805% $393 A- 6.125% 2/15/2033 103.826 5.850% $300 A- 6.625% 2/15/2038 106.715 6.153% $100 A- 7.500% 8/15/2042 119.486 6.173% $173 A- 7.825% 4/15/2043 132.520 5.777% $125 A- 6.875% 10/15/2043 110.084 6.191% Note: This table does not include the outstanding debt of Boeing's financing subsidiary, Boeing Capital Corporation. Sources: Boeing Company 10-Q; Bloomberg Financial Services; and Mergent Online.8/25/2019 Print canvas Boeing Lockheed Northrop Raytheon Martin Grumman Percentage of revenues derived from government (defense and space) 46% 93% 91% 73% Estimated betas 1. Value Line 1.05 0.60 0.70 0.80 2. Calculated against the S&P 500 index: 2 60 months 21 months 60 trading days 0.80 0.36 0.34 0.43 1.03 0.38 0.31 0.46 3. Calculated against the NYSE composite 1.45 0.34 0.27 0.66 index: 2 60 months 21 months 60 trading days 1.00 0.49 0.44 0.59 1.17 0.44 0.36 0.53 1.62 0.37 0.30 0.73 Effective marginal tax rate 0.35 0.35 0.35 0.35 Market-value debt/equity ratios 0.525 0.410 0.640 0.624 Sources: Case writer analysis; Value Line Investment Sung. Value Line betas were calculated from a regression analysis between the weekly percentage change in price of a stock and the weekly percentage changes of the New York Stock Exchange Composite Index. The beta was calculated using the last five years of data. 2 Regression periods for the 60-day, 21-month, and 60-month began on March 20, 2003, September 17, 2001, and June 16, 1998, respectively. Regression periods ended on June 16, 2003