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Financial Management (BUSI 640) Professor Fresard Airbus A3XX: Developing the world’s largest commercial jet Case Questions The purpose of this case is to estimate the relevant financial data necessary to generate cash flow projections and calculate the Net Present Value (NPV) of an investment opportunity. 1. Why is Airbus interested in building the A3XX? What are its objectives? 2. How many aircraft does Airbus need to sell per year in order to make a profit on the investment? Is this number greater or less than your estimate of total demand for very large aircraft (VLA) over the next 20 years? Hint : Consider all capital providers as a single entity and calculate the NPV (this means that you may assume that it is an all equity firm). To calculate the number of planes per year, find the present value of the following cash flows: Find the cash flows of the required investment during the “ramp-up” period of development. During the ramp-up period, assume that any planes sold are sold at cost (we know they are sold at a discount until they are in full production).
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