In October 1990‚ Boeing announced its plans of developing a new aircraft Boeing 777. In light of (Boeing’s CEO) Frank Shrotz’s goal of improving Boeing’s ROE‚ whether this new project would help him pursue his objective is a key issue. Sustained success demands willingness to gamble regularly; however the pertinent question is whether the financial success of this gamble would prove to be spectacular or fatal. Given the huge cost outlays‚ it is imperative to assess the present worth of the investment
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the WACC and why is it important to estimate a firm’s cost of capital? Do you agree with Joanna Cohen’s WACC calculation? Why or why not? 2. If you do not agree with Cohen’s analysis‚ calculate your own WACC for Nike and justify your assumptions. 3. Calculate the costs of equity using CAPM‚ the dividend discount model‚ and the earnings capitalization ratio. What are the advantages and disadvantages of each method? 4. What should Kimi Ford recommend regarding an investment in Nike? 2 Case Overview
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1. Why do think Larry Stone wants to estimate the firm’s hurdle rate? Is it justifiable to use the firm’s weighted average cost of capital as the divisional cost of capital? Please explain. (10% weighting) Answer The hurdle rate is the rate of return a firm has to offer finance providers to induce them to buy and hold financial security. (Arnold‚2007). This is also known as cost of capital or weighted average cost of capital. The returns offered by alternative securities with the same risk
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Marriot Case Marriot use the Weighted Average Cost of Capital to estimate the cost of capital for the corporation as a whole and for each division‚ and the hurdle rate is updated annually.(WACC = (1-Tc) * (D/A) * R[D] + (E/A) * R[E]) Marriot’s Tax Bracket = 175.9/398.9 = 44% Division’s asset weight to the corporation: Lodging = 2777.4/4582.7 = 0.59 Contract = 1237.7/4582.7 = 0.28 Restaurant = 567.6/4582.7 = 0.13 Risk free rate is 30 years T-Bond = 8.95% (Lodging use long-term debt)
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http://www.boeing.com/boeing/commercial/facilities/index.page Blog Task: Lean Manufacturing Strategy Company: Boeing Background: Boeing is the world’s largest aerospace company and the leading manufacturer of commercial jetliners and military aircraft combined. Additionally‚ Boeing designs and manufactures rotorcraft‚ electronic and defense systems‚ missiles‚ satellites‚ launch vehicles and advanced information and communication systems. As a major service provider to NASA‚ Boeing is the prime contractor
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weighted average cost of capital (WACC) to be 8.3%. I find error in this calculation as a result of the following points of disagreement: a) Weighting of Capital Structure: Use of book values of capital rather than the market values b) Cost of Debt Calculation: Incorrect method for calculating debt c) Tax Rate: Use of a tax rate derived from the summation of state and statutory taxes instead of the firm’s marginal tax rate 2. Revised Calculation of WACC: WACC reflects the weighted average
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Contemporary Management Assignment CASE STUDY: Cleaning up Boeing Q1: How would you describe Boeing’s unethical culture. So called rotten to the core (5)? The unethical culture inside Boeing was widespread‚ and affected multiple geographic areas and there were cases across all divisions of such unethical behaviour. The promotion of the well-being of stakeholders was no longer being practised. Managers were no longer taking the claims of all stakeholders into consideration in their
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I. Boeing History | | a. building blocks | | b. growing UTAC | | c. deregulation | | d. the jet age | | II.Boeing as a Market Leader | | a. threat of competition | | b. the attack | | c. management | | III. Threat of New Competition | | IV. Future of Boeing-Creation of Dreamliner | | I. The Boeing History A. Building Blocks A determined man once said‚ “We are embarked as pioneers upon a new science and industry in which
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Summary William Boeing founded the Boeing airplane company in early 20th century. After strings of acquisition and mergers‚ this company grew and became the current largest world aerospace industry. Followed by previous reorganizations in 19990s‚ this company decided to start its branding campaign in May 2001. This campaign was consisting of lots of effort and structural changes for the first time in this corporate history. The media was showing the initial success of this campaign just after
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Lincoln University Graduate School of Business Marketing Management Team Project Case 3: Boeing Company Team - 8 The five elements group: Derek Dellape : 7551 Synopsis As the largest aerospace company in the world‚ the Boeing Company employees more than 153‚000 people in some 67 countries. The great dominance of Boeing is due to its 1997 merger with McDonnell Douglas Corporation‚ an aerospace manufacturer‚ and its 1996 purchase of the defense and space units of Rockwell International
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