Boeing Bond Analysis - 3021 Words

Boeing Bond Analysis Presented to Dr. ----- Prepared by Filipe Ferro October 9, 2012 Table of Contents Boeing Company 3 Bond Issue 3 Unsystematic Risk 4 Principal Repayment 4 Debt to Invested Capital 4 Debt to Equity 4 Current amp; Quick Ratios 5 Interest Repayment 5 Times Interest Earned 5 Credit Position 6 Competitor Analysis 6 General Dynamics 6 Northrop Grumman 7 Systematic Risk 7 Market Responsiveness 7 Duration 8 Modified Duration 9 Accuracy of Rating 9 Interest Rate Expectations 9 Summary 10 Appendix 11 Descriptive Statistics 11 Regression Analysis 11 Duration amp; Modified Duration 12 References 13 Boeing Company Boeing is a manufacturer of aircrafts and national defense†¦show more content†¦If bankruptcy occurs, debentures will be the last of debt holders to get paid. Although it is not exactly good to have this somewhat high ratio, knowing that Boeing has a brand new and appealing aircraft reassures that positive future cash flows will cover this financial leverage. Samp;P’s NetAdvantage highlights the potential sales to emerging airlines from China and airlines with old worn out planes in the U.S. and Europe. Samp;P’s industry survey states â€Å"China, India, the Middle East, Eastern Europe, and Latin America, will drive growth in global air travel and demand for new aircraft.†4 The market for aircraft purchases looks like it will grow in the coming years, thus Boeing will have greater opportunities for sales. Current amp; Quick Ratios The current assets to current liabilities ratio was 1.22 for the 4th quarter of 2011, which means every $1 in current liabilities is covered by $1.22 in current assets. Boeing has enough current assets to pay off all its current liabilities if it needed to do so. The current ratio has been 0.9 for 2007, 0.8 for 2008, 1.1 for 2009, and 1.1 for 2010. The current ratio has been on an upward trend since 2008 which would imply added financial security in forecasts. But the current ratio assumes that a company’s current assets are highlyShow MoreRelatedBoeing Case Study1744 Words   |  7 PagesThe Boeing Company is an international aerospace and defense corporation originally founded by William E. Boeing in Seattle, Washington. The international corporate headquarters are now located in Chicago, Illinois (Boeing, 2009). Boeing was initially incorporated as Pacific Aero Products Company in 1916 (Boeing, 2009). Since 1916, Pacific Aero Products Company has transformed into Boeing and expanded into the largest global aircraft manufacturer by revenue, orders and deliveries, and the secondRead MoreCase Study of Boeings Decision to Develop the 7771299 Words   |  6 Pagesrate of return against which to evaluate the prospective IRRs from the Boeing 777? 1a. which beta did you use? Why? 1b. if you used the CAPM, which risk premium and risk free rate did you use? Why? 1c. which capital-structure weights did you use? Why? Answer: i. Key Assumptions for the Calculation: In order to calculate the appropriate rate of return against which to evaluate the prospective cash flows from the Boeing 777 project, several assumptions had to be made. First, in order to facilitateRead MoreThe Boeing 7e71250 Words   |  5 PagesThe Boeing 7E7 WACC Estimation In order to evaluate the prospective IRRs from the Boeing 7E7, we first try to estimate an appropriate required rate of return for accepting this project. The capital asset pricing model is applied to estimate the cost of equity of the commercial aircraft division: R_EC= ÃŽ ²_EC*(R_M-R_f )+R_f where REC is the cost of equity capital of the commercial aircraft division. ÃŽ ²EC is the beta for the commercial division of Boeing. This beta is used instead of the company’sRead MoreBoeings Strategy1485 Words   |  6 PagesRf = Risk free rate of return, usually U.S. treasury bonds ( ) ÃŽ ² = Beta for a company E(Rm) = Expected return of the market (commercial airlines market) E(Rm)-Rf = Sometimes referred to as the risk premium The beta and risk-free rate should be selected as required according to the Boeing 7E7 case study. For the CAPM the risk free rate of return for a given period is taken to be the return on government bonds over the period. The risk free rate of return at theRead MoreSituational Analysis, Airbus1448 Words   |  6 PagesSituational Analysis, Airbus. Porter’s Five Forces. Risk of Entry by Potential Competitors – The aviation industry is a very difficult industry to enter, and the risky of entry by potential competitors is extremely low. Rivalry among established companies – The intensity of rivalry among established companies within the aviation industry is very high. Currently the only competitor or Airbus is Boeing. Both of these companies gain market share from each other using prices, product design, advertisingRead MoreBoeing 777 Finance Case Study1061 Words   |  5 PagesBoeing 777 Project: Summary for the Board of Directors Boeing is currently operating with the majority market share of the commercial sector of aircraft manufacturing. Frank Shrontz, our CEO, has recently stated his goal to increase the company’s return on equity from its current average of 12%. The following summary will delve into the most appealing project for the future of this firm: the 777 aircraft. The purpose of this new product is to maintain our competitive advantage in commercial airlineRead MoreFinance Week 61558 Words   |  7 Pagesanticipated cash flows for the project are as follows: Year 1 $1,100,000 Year 2 $1,450,000 Year 3 $1,300,000 Year 4 $950,000 You have now been tasked with providing a recommendation for the project based on the results of a Net Present Value Analysis. Assuming that the required rate of return is 15% and the initial cost of the machine is $3,000,000. 1. What is the project’s IRR? (10 pts) Using the financial calculations in Microsoft Excel, the IRR is 22%. 2. What is the project’s NPV? (15Read MoreBusn379 Week 6 Course Project Part 2 Essay1346 Words   |  6 Pagesanticipated cash flows for the project are as follows: Year 1 $1,100,000 Year 2 $1,450,000 Year 3 $1,300,000 Year 4 $950,000 You have now been tasked with providing a recommendation for the project based on the results of a Net Present Value Analysis. Assuming that the required rate of return is 15% and the initial cost of the machine is $3,000,000. 1. What is the project’s IRR? (10 pts) Using this online IRR Calculation Tool http://finance.thinkanddone.com/online-i†¦ we get the followingRead MoreBoeing : The Boeing Company Essay1654 Words   |  7 Pages The Boeing Company (NYSE:BA) was founded July 15th, 1916. Boeing is one of the world’s largest producers of aircraft and aerospace systems, producing both commercial jets and defense, as well as space and security systems. Boeing’s operations are extensive and widespread, and can be located throughout more than 150 countries around the world. Boeing’s products are highly diversified and cater to all sectors within the aviation industry. Some of Boeing’s original products were the result of contractsRead MoreCase Studies in Finance: Estimating the Cost of Capital2017 Words   |  9 Pagesusually U.S. treasury bonds ÃŽ ² = Beta for a company E = Expected return of the market (commercial airlines market) (E - Rf) = Sometimes referred to as the risk premium The following table shows the average annual arithmetic returns investors earned on various asset classes over the period 1900 to 2003. (Source: Table 7.1 in Brealey/Myers/Allen) | Nominal Return | Real Return | Common Stocks | 11.7 | 8.5 | Long- term Government Bonds | 5.2 | 2.3 | Short-term