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Author Question: What is the Profitability Index of the Boeing 787 Dreamliner project? The Boeing 787-8 can carry 230 ... (Read 45 times)

james0929

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on: Apr 25, 2021
What is the Profitability Index of the Boeing 787 Dreamliner project? The Boeing 787-8 can carry 230 passengers up to 8,200 nautical miles at a cruising speed of mach 0.85. The Dreamliner is more comfortable for passengers because of higher cabin humidity. Boeing completed construction its assembly plant in Everett Washington in December 2007 at a total cost of $7B. Boeing has secured sales of 865 aircraft over the period 2008-2012 for total proceeds of $138.4B ($160M per aircraft). The cost of building each plane is $140M. Assume that sales (and costs) occur in December of each year. Assume that sales are spread evenly across the five years from 2008-2012. The project cash flows are shown in the table, below. What is the Profitability Index of the project if Boeing's cost of capital is 10%? Calculate the index as of December 1, 2007. Ignore taxes.

YearCapital InvestmentAnnual SalesAnnual RevenuesAnnual CostsCash Flows
2007-$7,000M​​​-$7,000
2008​173$27,680$24,220$3,460
2009​173$27,680$24,220$3,460
2010​173$27,680$24,220$3,460
2011​173$27,680$24,220$3,460
2012​173$27,680$24,220$3,460

◦ -1.52
◦ -0.44
◦ 1.06
◦ 1.87
◦ 2.43
Corporate Finance Online ¦ Eakins, McNally ¦ 2nd Edition
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Marked as best answer by james0929 on Apr 25, 2021

Melissahxx

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Reply #1 on: Apr 25, 2021
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james0929

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Reply 2 on: Apr 25, 2021
:D TYSM

covalentbond

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Reply 3 on: Yesterday
Wow, this really help

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