What is the break-even quantity of annual unit sales

Assignment Help Financial Management

Reference no: EM13908927

In early 1990, Boeing Co. decided to gamble $4 billion to build a new long-distance, 350-seat wide-body airplane called the Boeing 777. The price tag for the 777, scheduled for delivery beginning in 1995, is about $120 million apiece. Assume that Boeing’s $4 billion investment is made at the rate of $800 million a year for the years 1990 through 1994 and that the present value of the tax write-off associated with these costs is $750 million. Based on estimated annual fixed costs of $100 million, variable production costs of $90 million apiece, a marginal corporate tax rate of 34 percent and a discount rate of 14 percent, what is the break-even quantity of annual unit sales over the Boeing 777’s projected 15-year life? Assume that all cash inflows and outflows occur at the end of the year.

Reference no: EM13908927

Questions Cloud

Determining the value of any cash flow is the interest rate : We learned that one of the key variables in determining the value of any cash flow is the interest rate (sometimes referred to as discount rate). However, interest rates may be quoted in more than one way. What do the terms EAR and APR mean?

Present value of the hotels terminal value : The recently opened Grand Hyatt Wailea Resort and Spa on Maui cost $600 million, about $800,000 per room, to build. Assume that the $450 million expense of building the hotel can be written off straight line over a 30-year period (the other $150 mill..

Determining the properties of the system : Develop a utility in C language which will run in Linux operating systems to display following properties of the system:

What is the break-even quantity of annual unit sales : In early 1990, Boeing Co. decided to gamble $4 billion to build a new long-distance, 350-seat wide-body airplane called the Boeing 777. The price tag for the 777, scheduled for delivery beginning in 1995, is about $120 million apiece. what is the bre..

Draw a graph of state transitions and find steady-state pmf : Draw a graph of the state transitions for i ≤ 2, j ≤ 2. Find the steady-state PMF, {p(i, j); i, j ≥ 0}, for the Markov process.

Optimal capital structure-beckman engineering and associates : Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 6%, What is BEA's unlevered beta before restructuring? Use mark..

Contestants in the heavyweight division : At the State Fair Pie Eating Contest all contestants in the heavyweight division must weigh within 30 pounds of 250 pounds. Write a program that asks for a contestant's weight and then says if the contestant is allowed in the contest.

What risks do you foresee in purchasing this property : What risks do you foresee in purchasing this property? What measures would you take to manage these risks? Will these risks affect the price that you would offer? If so, how would they affect your pricing decision? If not, what factors would contr..

User Account

All Pages