Airbus Case Summary

 Airbus Circumstance Summary Composition

Inside the Airbus case we are confronted with a capital budgeting decision. It is the planning process used to determine if the firm's long term investments such as new machinery, replacement machines, new crops, new products, and research development projects are worth pursuing. It is budget for major capital, or investment, expenditures. Capital budgeting decisions are crucial to a firm's success for several factors. First, capital expenditures commonly require large outlays of funds. Second, firms need to ascertain the ultimate way to raise and repay these funds. Third, most capital budgeting decisions require a long-term commitment. Finally, the time of capital budgeting decisions is important. The moment large amounts of funds are raised, businesses must seriously consider the financial markets since the cost of capital is straight related to the present interest rate. Regarding Airbus the company is facing the decision of developing the world's most significant commercial plane in order to remain competitive on the substantial aircraft market with Boeing 747. In order to calculate if the investment will be worth taking, a reduced cash flow evaluation is used. How many plane does Airbus need to sell in order to break even on the investment? After making several assumption and calculation in the Net Present Value, Airbus would need to offer about forty-five aircrafts to be able to break even. (Please see stand out file). In case the Net present value can be negative, then your investment is usually not well worth taking as well as the project is not able to cover it is investment. When the NPV is usually equal to no, it is the point at which the project will certainly beak-even. If the NPV is positive, the project will be worth taking and it is able to cover all the expenditure costs and make a profit. Precisely what is Airbus' maximum exposure in taking on the A3XX task? Undertaking this project has very high risk, since the expenditure made by the business is very excessive. The maximum exposure that the business is accepting the task is to loose all the...


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