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Boeing is making a new autonomous aircraft for the Air Force. Development costs are $80 million in 2017, and $200 million in each of the years 2018 through 2031. In 2032, a ten year production run commences, with 50 aircraft produced per year at $10 million apiece. In the year after production completes, operation and maintenance commences. Operation and maintenance lasts for 40 years, at $5 million per year per aircraft.
a) Gen. Snow knows nothing about cash flow discounting, and so she treats $1 tomorrow the same as $1 today. What does she think the total life cycle cost is? What percent is development? production? O & M?
b) You have taken engineering economics, and you know the Air Force real discount rate is 7%. What is the present value of the life cycle costs? What percent is development? production? O & M?
You are trying to estimate the free cash flow to the firm for Wadhwa Inc. and are looking at its most recent financial filings: the annual report for the last fiscal year and its most recent quarterly report for the first three quarters of the curren..
You just won the $64 million Florida lottery, which is paid annually for 20 years ($3.2 a year). The Surely Company is offering you $30 million at once in exchange for the 20 installments on your winnings. If your opportunity cost of funds is 8%, sho..
An Asset currently trades at price S0. Let V0 be the current price (call premium plus put premium) of an at-the-money straddle on A expiring in one month. You have an initial capital amount of C0 and execute the following strategy. - keep C in cash w..
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An investment pays $2,100 per year for the first 3 years, $4,200 per year for the next 8 years, and $6,300 per year the following 12 years (all payments are at the end of each year). If the discount rate is 8.75% compounding quarterly, what is the fa..
If you invest $10,000 by purchasing 400 shares, what the expected value of your holdings next year?- What is the general lesson illustrated here?
Suppose your expectations regarding the stock price are as follows: State of the Market Probability Ending Price HPR (including dividends) Boom 0.22 $140 49.5% Normal growth 0.21 110 21.5 Recession 0.57 80 –19.0 Use Equations formula37.mml, formula55..
Given that the net present value (NPV) is generally considered to be the best method of analysis, why could you still use the other methods? You need to use other methods because the net present value method is unreliable when a project has unconvent..
The PARC Co. Inc. asked you to determine some of the after-tax cash flows for equipment used for research and development that is being considered. PARC expects the equipment to operate for five years and to require the purchase of $250,000 worth of ..
Using the data in the question for Milwaukee Surgical Supplies, what if the company adjusts by three percentage points for both low and high risk projects and the projects are classified as follows, Project A has high risk, Project B has high risk, P..
What is the most we can pay for the land to make a deal work?
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