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.
| Year | Capital Investment | Annual Sales | Annual Revenues | Annual Costs | Cash 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
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Project Management: Achieving Competitive Advantage
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