Question
You are a financial manager at Boeing, a company that manufactures and sells airplanes, satellites, defense products, and rockets, among other things. The company had
You are a financial manager at Boeing, a company that manufactures and sells airplanes, satellites, defense products, and rockets, among other things. The company had planned to begin making deliveries of its newest commercial airliner, the 797, in 2019. However, due to an unexpected issue with an engine supplier, you are now being forced to delay the launch of the plane by an entire year to 2020. You had anticipated first-year sales of the 797 to be worth $24 billion at the time of launch in 2019 (t=0). However, as a result of this delay, your competitor, Airbus, will now have the market for next generation passenger aircraft all to themselves and their new plane, the A390. Your marketing department now estimates revenues will fall by 35% by the time they are realized in 2020 (t=1).
If the interest rate is 6%, what is the cost of delaying the launch in terms of dollars in 2019? (do not include any symbols, such as $, in your answer)
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