The Boeing Corp A)$1,025M
B)$1,148M
C)$2,343M
D)$3,242M
E)$3,602M

question 40

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 is the NPV for the proposed acquisition if the cost of capital is 12%? 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)$1,025M
• B)$1,148M
• C)$2,343M
• D)$3,242M
• E)$3,602M

---

Definitions:

ATP Molecules

Adenosine triphosphate molecules, which serve as the primary energy carrier in all living organisms, facilitating energy transfer within cells.

Oxidation

A chemical reaction in which a substance loses electrons, often associated with the gain of oxygen or the loss of hydrogen, leading to an increase in oxidation state.

Glucose

A simple sugar that is an important energy source in living organisms and is a component of many carbohydrates.

Electron Transfer Chain

A series of compounds that transfer electrons from electron donors to electron acceptors via redox reactions, and couples this electron transfer with the transfer of protons (H+ ions) across a membrane.