The Boeing Corp A)$1,584M
B)$1,709M
C)$1,945M
D)$2,400M
E)$2,525M

question 29

Multiple Choice

The Boeing Corp. is considering building a new aircraft, the 787--larger than the 747 and larger than the Airbus A380. The company's Renton WA Facility, where 747s are currently manufactured, would have to be expanded. Expansion costs are forecast to be $2.5B, incurred at t = 0. Also at time t = 0, before production begins, inventory will be increased by $1.855B. Assume that this inventory is sold at the end of the project at t = 2. The first sales from operation of the new plant will occur at the end of year 1 (t = 1) . Boeing forecasts sales of 220 planes in each of the two years. The plane will be sold for $130M each. The cost of manufacturing a plane is $115M. Annual overhead expenses are $775M. The construction facilities are classified as 15 year property. When the plant is closed it will be sold for $1B. The company is in the 34% marginal tax bracket. Boeing's cost of capital is 12%. What are the operating cash flows at the end of Year 1 (t = 1) ? MACRS Depreciation Rates
$$\begin{array} { | c | c | c | } \hline \text { Year } & \mathbf { 1 0 - Y e a r } & \mathbf { 1 5 } - \text { Year } \\\hline 1 & 10.00 \% & 5.00 \% \\\hline 2 & 18.00 \% & 9.50 \% \\\hline 3 & 14.40 \% & 8.55 \% \\\hline\end{array}$$

• A)$1,584M
• B)$1,709M
• C)$1,945M
• D)$2,400M
• E)$2,525M

---

Definitions:

Free Legal Services

Legal advice, representation, or other legal work provided without charge to individuals who cannot afford to pay for such services.

Power

The capability to shape or control the actions of others or the direction of occurrences.

President

The elected head of a republican state or organization, often the highest executive officer with significant leadership responsibilities.

Salutation

A greeting used in letters or communication, often formal, such as "Dear" or "To whom it may concern."