Reference: Harvard Case 9-201-028

Why is Airbus interested in building the A3XX? What are its objectives? (5 points)

For all the questions below, assume that the market premium is 6%. To simplify your calculations, treat the launch aid and the risk-sharing partners' investment in Airbus A3XX as equity, so that the project is all-equity financed. Answer the questions from the perspective of the year of 2000 - the year in which the project is assessed in the case study.

How many aircrafts does Airbus need to sell per year, on average, in order to break even in terms of NPV on the investment? What is your estimate of total demand for very large aircraft (VLA) over the next 20 years? Given this estimate, is it possible for Airbus to break even on the investment over the next 20 years? (40 points)

What is your estimate of the value of the A3XX project? (40 points)

As Boeing, how would you respond to the A3XX project? How does your answer depend on what you think Airbus is likely to do? Note: The answer to this question is

expected to be mostly qualitative. (10 points)

Should Airbus commit to build the A3XX? (5 points)