Airbus Economic Analysis

Simplified Valuation Analysis for the Airbus A3XX

Key Assumptions as of 2008
Price per Plane
Number of Planes
Operating Margin

$225
40
17.5%

Discount Rate Assumptions (a)
Risk-free Rate
6.0%
10-year US Treasury yield (p. 8)
Asset Beta
0.84
Risk Premium
6.0%
Discount Rate 11.0%

in millions

General Assumptions as of 2000
Inflation Rate
2.0%
Tax Rate
38.0%

Results from the Model
NPV =
After-tax IRR =
Pre-tax IRR =
# planes sold by 2019
Capacity Constraint Violated?

Required Investment as of 2000 ($millions)
Research & Development
$11,000
Capital Expenditures
$1,000
Working Capital
$1,000

Required Investment (Ex. 10)
Research & Development
Capital Expenditure
Working Capital
Cumulative Investment
Research and Dvlp
Capital Expenditures
Working Capital

+ Depreciation (f)
- Capital Expenditures (f)
- Incr. in Working Capital (g)
Free Cash Flow
Discount Rate
Discount Factor

Max = 48 planes/year

2001

2002

2003

2004

2005

2006

2007

2008

2009

$1,100
$0
$0
$1,100

$2,200
$250
$150
$2,600

$2,200
$350
$300
$2,850

$2,200
$350
$300
$2,850

$1,320
$50
$200
$1,570

$880
$0
$50
$930

$660
$0
$0
$660

$440
$0
$0
$440

$0
$0
$0
$0

$1,100
$0
$0

Cash Flows (b)
Revenue
Number of Planes
Price per Plane
Operating Profit
Development Costs
R&D Expense
Depreciation (c)
Depr. Adjustment (d)
EBIT
Taxes (e)
@
38%
EBIAT

($64)
10.8%
24.9%
559
No

$3,300
$250
$150

$5,500
$600
$450

$7,700
$950
$750

$9,020
$1,000
$950

$9,900
$1,000
$1,000

$10,560
$1,000
$1,000
$7,132
32
$221
$1,248

$9,675
43
$225
$1,693

$9,869
43
$230
$1,727

($1,100)
$0
$0
($1,100)
$418
($682)

($2,200)
($25)
$0
($2,225)
$846
($1,380)

($2,200)
($60)
$0
($2,260)
$859
($1,401)

($2,200)
($95)
$0
($2,295)
$872
($1,423)

($1,320)
($100)
$0
($1,420)
$540
($880)

($880)
($100)
$100
($473)
$180
($293)

($660)
($100)
$100
$588
($223)
$365

($440)
($100)
$100
$1,253
($476)
$777

$0
($100)
$100
$1,727
($656)
$1,071

$0
$0
$0
($682)

$25
($250)
($150)
($1,755)

$60
($350)
($300)
($1,991)

$95
($350)
($300)