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A Financial Feasibility Study on the New Aircraft Investment Based on Multiple Perspectives -- A Case Study of Boeing 7E7

Commercial aircraft design and manufacture is known for the characteristics of high investment, high risk and high technology. Typically it is the number one priority to analyze financial feasibility on the manufacturer level to measure future risks and avoid strategic decision-making mistakes. Unlike the fruitful results in the research on technical feasibility of the engine and aircraft body, few studies have been conducted on financial feasibility of new aircraft. This paper formulated a three-step investment feasibility analysis and evaluation method based on multiple perspectives on the manufacturer company level, considering the determination of financial factors, capital structure, sensitivity analysis, economic attractiveness and comparative analysis. Based on the analysis and evaluation theory, this paper took Boeing 7E7 project for instance, demonstrated how a three-step method can be utilized to measure financial feasibility of a new aircraft project. In the first step, the determination of five financial indicators including beta, risk-free rate, market risk premium, cost of equity, cost of debt was illustrated for the project evaluation. In the second step, sensitivity analysis was conducted with @Risk software and comparative study between the financial indicators was clarified. In the third step, economic attractiveness analysis was demonstrated, where macro and micro environment assessment was explained. With the Boeing 7E7 project demonstration, the three-step method was proved to be an effective and applicable method for new aircraft project evaluation. The method proposed in this paper could offer references for general aircraft manufacturers when launching new commercial aircraft like COMAC C919, C929 and other homemade large aircraft.

Financial Feasibility, New Aircraft, Project Evaluation, Sensitivity Analysis

Mengyuan Lu, Xiao Zhang, Tira Zhang. (2022). A Financial Feasibility Study on the New Aircraft Investment Based on Multiple Perspectives -- A Case Study of Boeing 7E7. American Journal of Traffic and Transportation Engineering, 7(5), 84-92.

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