Betas

Prof. H. Pirotte - SBS/ULB

Ó Nov 2003

Data

Pre-tax cost of debt

tc
Market value of debt
Share price
Number of shares
rf
Rm-rf

Calculations
Beta
MV Equity
Total Value
D/V
E/V
kd(1-tc)
ke
WACC A

E
Simple

Case 1 Case 2 Case 2

Rm-rf 5.40% 5.40% 5.40%
rf 8.82% 8.82% 8.82%
Beta 1.79 1.79 0.81
ke 18.49% 18.49% 13.19%
kd 9.73% 9.31% 9.73%
tc 34% 34% 34%
E 96% 96% 98%
D 4% 4% 2%
WACC 18.00% 17.99% 13.07%

Commercial Beta

tc 34%

Beta equity D/E Beta assets

Boeing 0.81 0.018 0.80

Grumman 0.8 1.756 0.37

Northtrop 0.74 1.288 0.40
Lockheed 0.87 1.182 0.49
Average 0.42

Weigths of Commercial for Boeing

ALL Comm aircraft %
Revenues 20623 14305 69%
Profit 922 1165 126%
Assets 13278 6675 50%

Revenues 0.9686
Profit 0.7211
Assets 1.1771

Back to Equity Beta

Revenues 0.9802
Profit 0.7296
Assets 1.1911

rf 8.82%
market premi 5.40%
ke Revenues 14.11%
Profit 12.76%
Assets 15.25%

kd 9.31%
D/V 2%
E/V 98%
WACC Revenues 13.95%
Profit 12.63%
Assets 15.07%
NPVs
Prof. H. Pirotte - SBS/ULB
Ó Nov 2003
12%
3483.272
1990 -93.72 -93.72
1991 -957.3 -854.732
1992 -1451.76 -1157.33
1993 -1078.82 -767.883
1994 -711.98 -452.476
1995 -229.97 -130.491
1996 -681.74 -345.391
1997 1806.97 817.3815
1998 1914.06 773.0567
1999 1676.05 604.4004
2000 1821.34 586.4227
2001 1716.79 493.5361
2002 1717.27 440.7804
2003 1590 364.387
2004 1798.97 368.1049
2005 616.79 112.6852
2006 1484.73 242.1916
2007 2173.59 316.5711
2008 1641.97 213.5211
2009 677.92 78.71111
2010 1886.97 195.6161
2011 2331.34 215.7879
2012 2576.47 212.9259
2013 2213.18 163.306
2014 2104.74 138.6647
2015 2285.77 134.4565
2016 2353.81 123.624
2017 2423.88 113.6644
2018 2496.06 104.5082
2019 2568.6 96.02268
2020 2641.01 88.15143
2021 2717.53 80.98706
2022 2798.77 74.47157
2023 2882.44 68.48028
2024 2964.44 62.88251
THE BOEING 777 CASE

Historic Boeing Sales Trends

Calculation of Pattern of Yearly Unit Sales over First 20 Years
Years of Deliveries
Aircraft Model: 1 2 3 4
707 8 77 91 80
727 6 95 111 135
737 4 105 114 37
747 4 92 69 30
757 2 25 18 36
767 20 55 29 25

Average 7 75 72 57
% of 10 year 1.42% 14.50% 13.95% 11.08%

Exhibit 6
Boeing 777 - Cash Flows

Assumptions
Price per Plane 130
WCR as % of sales 9.8%
GS&A exp (% of sales) 4.0%
R&D exp (% of sales) 3.0% (excluding 1990-1995)
Cap Ex (% of sales) 0.1% (excluding 1990-1994 and years before introduction of derivative
Depreciation double digit accelerated method
Total # of Planes yrs 1-10 1000
Total # of Planes yrs 11-20 1000
WACC 20.0%
Inflation 3.0%
Marginal Effective Tax Rate 34.0%

1990
Revenues
Planes Delivered
Price per Plane
Total Revenues

Cost of Goods Sold

Gross Profit

Depreciation 0.00
GS&A Expense
Operating Profit 0.00
R&D Expense 142.00

Pre-tax Profit (142.00)

Taxes (or Tax Credit) (48.28)
After-tax Profit (93.72)
Capital Expenditure 0.00
Depreciation Add-back
Change in Wkg. Capital
Annual Free Cash Flow (93.72)
PV(FCF) -93.72
TOTAL VALUE -267.38
IRR 18.9%

Boeing 777 - Depreciation

1991 Cap Ex (net, beg. year)
Yearly Depreciation Expense
Cumulative Depreciation Exp
1992 Cap Ex (net, beg. year)
Yearly Depreciation Expense
Cumulative Depreciation Exp
1993 Cap Ex (net, beg. year)
Yearly Depreciation Expense
Cumulative Depreciation Exp
1994 Cap Ex (net, beg. year)
Yearly Depreciation Expense
Cumulative Depreciation Exp
2003 Cap Ex (net, beg. year)
Yearly Depreciation Expense
Cumulative Depreciation Exp
2004 Cap Ex (net, beg. year)
Yearly Depreciation Expense
Cumulative Depreciation Exp
2008 Cap Ex (net, beg. year)
Yearly Depreciation Expense
Cumulative Depreciation Exp

Total Annual Depreciation Expense

Sensitivity Analysis: IRR

Unit Price ($millions)

-267.38 100 110 120

700 -1,363.21 -1,207.69 -1,052.16
800 -1,201.87 -1,030.21 -858.55
Unit Volume (first 10 yrs.) 900 -1,040.52 -852.72 -664.93
1000 -879.17 -675.24 -471.31
1100 -717.82 -497.76 -277.69
1200 -556.47 -320.27 -84.07
 R&D Exp./Sales

-267.38 1.0% 2.0% 3.0%

1.0% 929.32 692.92 456.52
2.0% 688.02 451.62 215.22
GS&A/Sales 3.0% 446.72 210.32 -26.08
4.0% 205.42 -30.98 -267.38
5.0% -35.88 -272.28 -508.68
6.0% -277.18 -513.58 -749.98
7.0% -518.48 -754.88 -991.28
 5 6 7 8 9 10
68 34 38 61 83 18
155 160 115 54 33 41
29 22 23 55 51 41
30 22 21 27 20 32
35 40 48 51 77 81
27 37 40 37 60 62
Sum of avg of yrs 1-10 516
57 53 48 48 54 46
11.11% 10.17% 9.21% 9.21% 10.47% 8.88%

oduction of derivatives)

1991 1992 1993 1994 1995 1996

14 145
$130.00 $133.90
1,847.55 19,418.96

1,662.79 16,506.12
184.75 2,912.84

40.00 96.00 116.40 124.76 112.28 101.06

73.90 776.76
(40.00) (96.00) (116.40) (124.76) (1.43) 2,035.03
865.00 1,340.00 1,240.00 840.00 240.00 582.57

(905.00) (1,436.00) (1,356.40) (964.76) (241.43) 1,452.46

(307.70) (488.24) (461.18) (328.02) (82.09) 493.84
(597.30) (947.76) (895.22) (636.74) (159.34) 958.62
400.00 600.00 300.00 200.00 1.85 19.42
40.00 96.00 116.40 124.76 112.28 101.06
181.06 1,722.00
(957.30) (1,451.76) (1,078.82) (711.98) (229.97) (681.74)
-797.75 -1008.166667 -624.3194444 -343.35532407 -92.418831198 -228.31254758

1991 1992 1993 1994 1995 1996

400.00 360.00 324.00 291.60 262.44 236.20
40.00 36.00 32.40 29.16 26.24 23.62
40.00 76.00 108.40 137.56 163.80 187.42
600.00 540.00 486.00 437.40 393.66
60.00 54.00 48.60 43.74 39.37
60.00 114.00 162.60 206.34 245.71
300.00 270.00 243.00 218.70
30.00 27.00 24.30 21.87
30.00 57.00 81.30 103.17
200.00 180.00 162.00
20.00 18.00 16.20
20.00 38.00 54.20

40.00 96.00 116.40 124.76 112.28 101.06

130
-896.64
-686.89
-477.13
-267.38
-57.63
152.13
 4.0% 5.0%
220.12 -16.28
-21.18 -257.58
-262.48 -498.88
-503.78 -740.18
-745.08 -981.48
-986.38 -1,222.78
-1,227.68 -1,464.08
 11 12 13 14 15 16
11 59 19 10 4 11
92 91 91 67 118 136
25 40 77 92 108 95
67 73 53 25 23 16
90 90 90
60 48 36

58 67 61 49 63 65
11.14% 12.95% 11.82% 9.40% 12.26% 12.50%

1997 1998 1999 2000 2001 2002

140 111 111 102 92 92

$137.92 $142.05 $146.32 $150.71 $155.23 $159.88
19,244.23 15,737.95 16,257.35 15,333.42 14,289.29 14,717.97

15,202.94 12,275.60 12,518.16 11,653.40 10,859.86 11,038.48

4,041.29 3,462.35 3,739.19 3,680.02 3,429.43 3,679.49

90.95 82.72 77.75 75.63 75.00 75.00

769.77 629.52 650.29 613.34 571.57 588.72
3,180.57 2,750.11 3,011.14 2,991.06 2,782.86 3,015.77
577.33 472.14 487.72 460.00 428.68 441.54

2,603.24 2,277.97 2,523.42 2,531.05 2,354.18 2,574.23

885.10 774.51 857.96 860.56 800.42 875.24
1,718.14 1,503.46 1,665.46 1,670.49 1,553.76 1,698.99
 19.24 15.74 16.26 15.33 14.29 14.72
90.95 82.72 77.75 75.63 75.00 75.00
(17.12) (343.62) 50.90 (90.54) (102.33) 42.01
1,806.97 1,914.06 1,676.05 1,821.34 1,716.79 1,717.27
504.291927902 445.149336101 324.830446353 294.155805219 231.059836817 192.602814152

1997 1998 1999 2000 2001 2002

212.58 191.32 171.32 151.32 131.32 111.32
21.26 20.00 20.00 20.00 20.00 20.00
208.68 228.68 248.68 268.68 288.68 308.68
354.29 318.86 286.98 256.98 226.98 196.98
35.43 31.89 30.00 30.00 30.00 30.00
281.14 313.02 343.02 373.02 403.02 433.02
196.83 177.15 159.43 143.49 128.49 113.49
19.68 17.71 15.94 15.00 15.00 15.00
122.85 140.57 156.51 171.51 186.51 201.51
145.80 131.22 118.10 106.29 95.66 85.66
14.58 13.12 11.81 10.63 10.00 10.00
68.78 81.90 93.71 104.34 114.34 124.34

90.95 82.72 77.75 75.63 75.00 75.00

 17 18 19 20
21 7 9 8
131 94 26 11
82 67 115 141
24 35 23 24

sum of avg of yrs 11-20 566

65 51 43 46
12.50% 9.84% 8.38% 8.91%

2003 2004 2005 2006 2007 2008

105 89 111 130 118 94

$164.68 $169.62 $174.71 $179.95 $185.35 $190.91
17,233.97 15,066.42 19,468.56 23,307.53 21,911.40 17,944.00

12,925.47 11,299.82 16,548.27 18,879.10 17,310.01 13,996.32

4,308.49 3,766.61 2,920.28 4,428.43 4,601.39 3,947.68

99.46 121.48 116.83 112.65 100.20 129.20

689.36 602.66 778.74 932.30 876.46 717.76
3,519.67 3,042.47 2,024.71 3,383.48 3,624.73 3,100.72
517.02 451.99 584.06 699.23 657.34 538.32

3,002.65 2,590.47 1,440.65 2,684.25 2,967.39 2,562.40

1,020.90 880.76 489.82 912.65 1,008.91 871.22
1,981.75 1,709.71 950.83 1,771.61 1,958.48 1,691.19
 244.64 244.64 19.47 23.31 21.91 567.22
99.46 121.48 116.83 112.65 100.20 129.20
246.57 (212.42) 431.41 376.22 (136.82) (388.81)
1,590.00 1,798.97 616.79 1,484.73 2,173.59 1,641.97
148.60758855 140.115536029 40.0327657924 80.3059552428 97.9708511797 61.6740001629

2003 2004 2005 2006 2007 2008

91.32 71.32 51.32 31.32 11.32 0.00
20.00 20.00 20.00 20.00 11.32 0.00
328.68 348.68 368.68 388.68 400.00 400.00
166.98 136.98 106.98 76.98 46.98 16.98
30.00 30.00 30.00 30.00 30.00 16.98
463.02 493.02 523.02 553.02 583.02 600.00
98.49 83.49 68.49 53.49 38.49 23.49
15.00 15.00 15.00 15.00 15.00 15.00
216.51 231.51 246.51 261.51 276.51 291.51
75.66 65.66 55.66 45.66 35.66 25.66
10.00 10.00 10.00 10.00 10.00 10.00
134.34 144.34 154.34 164.34 174.34 184.34
244.64 220.18 198.16 178.35 160.51 144.46
24.46 22.02 19.82 17.83 16.05 14.45
24.46 46.48 66.30 84.13 100.18 114.63
244.64 220.18 198.16 178.35 160.51
24.46 22.02 19.82 17.83 16.05
24.46 46.48 66.30 84.13 100.18
567.22
56.72
56.72

99.46 121.48 116.83 112.65 100.20 129.20

 2009 2010 2011 2012 2013 2014

123 125 125 98 84 89

$196.64 $202.54 $208.61 $214.87 $221.32 $227.96
24,103.23 25,316.97 26,076.48 21,133.07 18,550.25 20,321.64

20,487.75 20,506.75 20,600.42 16,483.79 14,283.69 15,444.45

3,615.49 4,810.22 5,476.06 4,649.27 4,266.56 4,877.19

96.99 76.84 65.81 61.68 57.96 54.61

964.13 1,012.68 1,043.06 845.32 742.01 812.87
2,554.37 3,720.71 4,367.19 3,742.27 3,466.59 4,009.72
723.10 759.51 782.29 633.99 556.51 609.65

1,831.27 2,961.20 3,584.89 3,108.28 2,910.08 3,400.07

622.63 1,006.81 1,218.86 1,056.82 989.43 1,156.02
1,208.64 1,954.39 2,366.03 2,051.46 1,920.65 2,244.05
 24.10 25.32 26.08 21.13 18.55 20.32
96.99 76.84 65.81 61.68 57.96 54.61
603.60 118.95 74.43 (484.45) (253.12) 173.60
677.92 1,886.97 2,331.34 2,576.47 2,213.18 2,104.74
21.2194241197 49.2197185813 50.6755644226 46.6699171635 33.4077852888 26.475733742

2009 2010 2011 2012 2013 2014

0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00
400.00 400.00 400.00 400.00 400.00 400.00
0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00
600.00 600.00 600.00 600.00 600.00 600.00
8.49 0.00 0.00 0.00 0.00 0.00
8.49 0.00 0.00 0.00 0.00 0.00
300.00 300.00 300.00 300.00 300.00 300.00
15.66 5.66 0.00 0.00 0.00 0.00
10.00 5.66 0.00 0.00 0.00 0.00
194.34 200.00 200.00 200.00 200.00 200.00
130.01 117.01 104.78 92.55 80.32 68.08
13.00 12.23 12.23 12.23 12.23 12.23
127.63 139.86 152.10 164.33 176.56 188.79
144.46 130.01 117.01 104.78 92.55 80.32
14.45 13.00 12.23 12.23 12.23 12.23
114.63 127.63 139.86 152.10 164.33 176.56
510.50 459.45 413.50 372.15 334.94 301.44
51.05 45.94 41.35 37.22 33.49 30.14
107.77 153.72 195.07 232.28 265.78 295.92

96.99 76.84 65.81 61.68 57.96 54.61

 2015 2016 2017 2018 2019 2020

89 89 89 89 89 89
$234.79 $241.84 $249.09 $256.57 $264.26 $272.19
20,931.29 21,559.23 22,206.00 22,872.18 23,558.35 24,265.10

15,907.78 16,385.01 16,876.56 17,382.86 17,904.35 18,441.48

5,023.51 5,174.21 5,329.44 5,489.32 5,654.00 5,823.62

52.83 52.83 52.83 52.83 47.52 35.28

837.25 862.37 888.24 914.89 942.33 970.60
4,133.43 4,259.02 4,388.38 4,521.61 4,664.15 4,817.74
627.94 646.78 666.18 686.17 706.75 727.95

3,505.49 3,612.24 3,722.20 3,835.45 3,957.40 4,089.78

1,191.87 1,228.16 1,265.55 1,304.05 1,345.52 1,390.53
2,313.63 2,384.08 2,456.65 2,531.39 2,611.89 2,699.26
 20.93 21.56 22.21 22.87 23.56 24.27
52.83 52.83 52.83 52.83 47.52 35.28
59.75 61.54 63.38 65.29 67.24 69.26
2,285.77 2,353.81 2,423.88 2,496.06 2,568.60 2,641.01
23.9608497819 20.5616891967 17.6448608388 15.141903563 12.9849506694 11.1258536867

2015 2016 2017 2018 2019 2020

0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00
400.00 400.00 400.00 400.00 400.00 400.00
0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00
600.00 600.00 600.00 600.00 600.00 600.00
0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00
300.00 300.00 300.00 300.00 300.00 300.00
0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00
200.00 200.00 200.00 200.00 200.00 200.00
55.85 43.62 31.39 19.15 6.92 0.00
12.23 12.23 12.23 12.23 6.92 0.00
201.03 213.26 225.49 237.72 244.64 244.64
68.08 55.85 43.62 31.39 19.15 6.92
12.23 12.23 12.23 12.23 12.23 6.92
188.79 201.03 213.26 225.49 237.72 244.64
271.30 242.94 214.58 186.22 157.86 129.49
28.36 28.36 28.36 28.36 28.36 28.36
324.28 352.64 381.00 409.37 437.73 466.09

52.83 52.83 52.83 52.83 47.52 35.28

 2021 2022 2023 2024

89 89 89 89
$280.36 $288.77 $297.43 $306.35
24,993.05 25,742.85 26,515.13 27,310.58

18,994.72 19,564.56 20,151.50 20,756.04

5,998.33 6,178.28 6,363.63 6,554.54

28.36 28.36 28.36 16.05

999.72 1,029.71 1,060.61 1,092.42
4,970.25 5,120.21 5,274.67 5,446.07
749.79 772.29 795.45 819.32

4,220.46 4,347.92 4,479.21 4,626.75

1,434.96 1,478.29 1,522.93 1,573.09
2,785.50 2,869.63 2,956.28 3,053.65
 24.99 25.74 26.52 27.31
28.36 28.36 28.36 16.05
71.34 73.48 75.68 77.95
2,717.53 2,798.77 2,882.44 2,964.44
9.54016468017 8.18779505364 7.02715217368 6.0225478796

2021 2022 2023 2024

0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
400.00 400.00 400.00 400.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
600.00 600.00 600.00 600.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
300.00 300.00 300.00 300.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
200.00 200.00 200.00 200.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
244.64 244.64 244.64 244.64
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
244.64 244.64 244.64 244.64
101.13 72.77 44.41 16.05
28.36 28.36 28.36 16.05
494.45 522.81 551.17 567.22

28.36 28.36 28.36 16.05

 Graph

Cumulative Project Cash Flows

Undiscounted and Discounted

12
Billions of U.S. Dollars

10

0
Year of Project Life
Undiscounted

Page 21