Fin/419 – Week 2 – Financial Outcomes Lt Paper
Boeing Financial Outcomes LT Team C: Mandy Turner, Kyle Smith, Kim Brown, Gary Kelly FIN/419 June 27, 2011 Sarah Newton Boeing Financial Outcomes In this paper Team C has selected to report financial outcomes for the Boeing Company. We will compare and contrast three potential financial outcomes that we envision for the initiative in using the most recent annual report and other financial statements. We will evaluate our discoveries to determine the most likely outcome. We will also include calculations that support our analysis of various financial outcomes and discuss the financial effect on Boeing.
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Boeing is the largest global aircraft producer that started in the mid-1916 and continues to grow by producing the biggest aircrafts and improving them with today’s technologies. First making people more aware of what Boeing is and what it stands for brings more awareness of how successful the company is. In obtaining the attention of the people, we can go on from there. Boeing is a global company made of different business units, which is why Boeing is so successful. In offering different products, it opens doors for more adverse business.
The different business units are Boeing commercial Airplanes (BCA), Boeing Defense, Space & Security (BDS) Engineering, Operations & Technology, Boeing Capital, and Boeing Shared Services Group. We the members of Team C think that the financial situation of Boeing could be quite successful. Many things happen regularly that bring in revenue, from all the different business units Boeing operates. If more people are informed they may feel the need to join in. Making money is not as easy as some may think so a game plan helps guild any company to success.
The plan that this team sees is to make people understand the need and wants of the Boeing Company and if they agree they will be more willing to join in or even purchase from the company. We envision a great financial outcome from our initiative because we are making people more aware of what they were missing out on. The Boeing Company has been looked over many times. It should not have because you can learn some great things if you just pay attention to the information that are available to you.
For example, Boeing is a company that employs about 164,495 people from different states all over. We are sure that if the company was not a great one there would not be the need for that many jobs. Boeing is also not something new but continues to bring new things to the attention of many. Boeing is also not new to the industry but continues to bring new things to the attention of many. Boeing started in 1916 but under the name Pacific Aero Products Company, and in 1917 it was renamed to the Boeing Airplane Company and still running strong today.
We believe that this company will bring in billions in the next few years just as it has been doing for some time now. On February 24, 2011, Boeing was awarded the contract from the United States Air Force “to design, develop, manufacture and deliver four next generation aerial refueling tankers. The KC-46A Tanker will be a derivative of its 767 commercial aircraft” (Boeing, 2011, p. 28). This opportunity will additionally assist in rebuilding the economy with an estimated 50,000 United States jobs.
The contract has the weighted potential of an initial $4. 4 billion investment and potential revenue of $30 billion over the next six years. However, the figures can change if all design, development, and manufacturing estimates do not incur any changed to the estimated costs. “This initial contract is a fixed-price incentive firm contract, valued at $4. 4 billion and involves highly complex designs. Changes to our estimated cost to perform the work could result in a material charge” (Boeing, 2011, p. 28).
When taking into consideration that the price of the 767 commercial aircraft ranges from $144. 1 million to $180. 6 million (Boeing, 2011, prices) that is without the equipment and technology that is added to create a KC-46A Tanker, the risk factor is that there will be changes to the estimated costs, which are highly possible. Turning a 767 into a KC-46A Tanker includes building each tanker with the latest and most advanced technology and capable of meeting or exceeding the Air Force’s needs for transport of fuel, cargo, passengers, and patients.
It includes advanced technology systems that meet the demanding mission requirements of the future, including a digital flight deck featuring Boeing 787 Dreamliner electronic displays and a flight control design philosophy that places aircrews in command rather than allowing computer software to limit combat maneuverability. The NewGen Tanker also features an advanced KC-10 boom with an expanded refueling envelope, increased fuel offload rate and flyby-wire control system] (Boeing, 2011, Media, p. 28).
However, Boeing’s very competent research and development team has created a very detailed proposal that should have minimal risk factors or changes to the estimated costs, particularly in the production options. “This contract contains production options. If all options under the contract are exercised, we expect to deliver 179 aircraft for an expected contract value of approximately $30 billion” (Boeing, 2011, p. 28) by 2017. Boeing offers a range of programs that service the military community that include communications technology, global positioning software, intelligence gathering, and weather reporting.
The network and space system (N) is one of these programs. N is broken into six independent divisions: Argon ST; Information Solutions; Network and Tactical Systems; Space and Intelligence; Space Exploration; Strategic Missile and Defense Systems. “Since the early 1960’s, Boeing has produced and launched more than 265 satellites” (Boeing N, 2011 pg. 8). Satellites fall in the division of Space and Intelligence Systems. Three Geostationary Operations Environmental Satellites (GOES), GOES-N, GOES-O, and GOES-P have been recently delivered into space.
These satellites are designed to work with NOAA and NASA to predict and track weather patterns and are examples of civil and commercial satellites. Weather is a regular discussion in the news. Tornados, hurricanes, typhoons, and severe flooding are issues that Boeing satellites are designed to handle. A second type of satellite produced by Boeing is the Wideband Global SATCOM. This satellite is an example of a military satellite. “Future versions will include a radio frequency bypass enhancement that supports airborne intelligence, surveillance, and reconnaissance missions requiring higher data rates” (Boeing N, 2011, pg. ). In 2010 Boeing launched three commercial and civil satellites, and one military satellite and created $189 million in revenues according to the 2010 annual report. In 2009 a total of six satellites were launched, three civil and commercial and three military and revenues were $164 million. In 2008 only one civil and commercial satellite was launched and revenues were $178 million. 2008 revenues were high because of outside settlement. These are historical values that represent the optimistic, pessimistic, and most likely revenue scenario.
The discoveries and most likely outcome for Boeing are positive ones. Boeing employs many people and has the potential to hire about 50,000 more for the tankers that will be built for the Air Force. These tankers will make Boeing 30 billion dollars over a six-year period. This makes the outcome for Boeing look as they have a great opportunity to grow and profit. Boeing is building two A160T Hummingbirds for the Marines who will keep that division busy for a long time to come. Boeing has also received a contract from the U. S. Navy to build an Integrator for the Small Tactical Unmanned Aircraft System program.
It has many other prototypes on the horizon that if they come through will be worth billions in military contracts. Their V-22 Osprey is used on humanitarian aid projects around the world. Boeing has contracts to do the maintenance on their older planes, which are still flying, so that is a steady income for the large organization. With all of the contracts, prototypes, older airplanes and the new and next generation aircraft up for production, worked on and sold by Boeing not only means good things for the present, but it also looks good for the future.
The contract with USAF bringing in a net gross of $30 billion over the next six years to make 179, which is a total of about 30 tankers a year for the next six years. The initial costs/investment for the research, development, and production of four aerial refilling tankers is $4. 4 billion. The price of each new tanker was calculated by taking the $30 billion and dividing it by the expected 179 tankers, which is $167. 6 million. $30 billion is the total net gross of 179 tankers over six years with no changes to the estimated costs would be the expected optimistic outcome.
As a guesstimate, the least likely outcome would be if there were major changes to the estimated costs and those costs caused the price of each tanker to be increased to $10 million each, which would decrease the number of tankers to 169 made for the contract. As the possible most likely outcome, there would be minor changes to the estimated costs and those costs caused the price of each tanker to be increased to $5 million each, which would decrease the number of tankers to 174. Boeing Air Force Tanker Contract Initial Investment $4. (In Billions) Annual Cash Flows Outcome: Optimistic $ 30. 00 Most Likely $ 16. 69 Pessimistic $ 8. 70 Net Present Value Outcome: Optimistic $23. 94 Most Likely$24. 14 Pessimistic$24. 86 In conclusion, Team C selected The Boeing Company to report their financial outcomes. We compared and contrasted three potential financial outcomes that we envision for the initiative by using the most recent annual report and other financial statements. We evaluate our discoveries to determine the most likely outcome.
We also included calculations that support our analysis of various financial outcomes and discussed the financial effects on Boeing. Our objective was to show that Boeing is the largest global aircraft producer that continues to grow by producing the biggest aircrafts and improving them with today’s technologies. We hope to show with our analysis that Boeing not only means good things for the present, but it also looks good for the future. References Boeing 2010 Annual Report http://sec. gov/Archives/edgar/data/12927/000119312511028490/d10k. tm#rom117824 Boeing (2011). SEC Filing of Form 10-Q-Additional Considerations. Retrieved June 26, 2011, from: http://sec. gov/Archives/edgar/data/12927/000119312511111215/d10q. htm#toc163858_24 Boeing (2011). Commercial Airplane Pricing. Retrieved June 26, 2011, from: http://www. boeing. com/commercial/prices/index. html Boeing (2011). Media: News Releases and Statements. Retrieved June 26, 2011, from: http://boeing. mediaroom. com/index. php? s=43=1638 Boeing N http://www. boeing. com/bds/network_space/files/NandSS_brochure. pdf