In 1967,Lockheed Planned to Build a Wide-Bodied Passenger Aircraft Called

question 1

Multiple Choice

In 1967,Lockheed planned to build a wide-bodied passenger aircraft called the L-1011 Tri Star airbus.The pre-production phase of the Tri Star project was planned to end in 1971 and total $1B.Lockheed planned to sell 35 aircraft per year for six years between 1972 and 1977 with an operating profit of $2M per aircraft.This sales forecast was aggressive as it represented a market share of 45% of the world market for wide-bodied aircraft (which was forecast to be about 80 aircraft per year) .
By 1971 the company was in financial distress and had to seek a government bailout.
At the end of 1967,Lockheed had 11.3 million shares outstanding which traded at $70 per share.If the market had known the NPV of the L-1011 project at that time,then what would the stock price have been?

• A) Larger than $70; hard to tell without more information
• B) Much less than $70, as the project clearly had a large, negative NPV
• C) About $70; the NPV of the project was close to zero
• D) $70; the NPV of a project does not affect the stock price

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Definitions:

Digestive Tract

A series of hollow organs joined in a long, twisting tube from the mouth to the anus, involved in digesting food.

Ghrelin

A hormone produced in the stomach that stimulates appetite, signaling the body to consume food.

Lateral Hypothalamus

A region of the hypothalamus involved in hunger regulation and the initiation of eating behavior.

Ventromedial Hypothalamus

An area of the brain that plays a significant role in regulating hunger and satiety, involved in stopping the sensation of hunger once an individual is full.