# Boeing 7E7 Case Study

**Tutor description**

re = rf + βe[rm – rf] - Eq. 1 where re = cost of equity for Boeing portfolio rf = risk-free rate βe = Equity beta for the portfolio rm = equity market risk premium rate (EMRP) rf = 4.56% which is the 30-year treasury bond value. We took this value as the risk free rate since the 7E7 project would have a time span of 30 years, if undertaken. βe = 1.05, from Exhibit 10 which is the Value Line estimated beta value. Reasons for choosing this value over other values: 1. Value Line betas are calculated from the regression analysis of the percentage changes of a stock price and percentage changes of NYSE composite Index over a period of 5 years which includes a larger set of data. 2. We believe that NYSE encompasses a wider market than S&P 500. 3. A beta value of 1.05 reflects volatility in Being’s stock price better than other beta values due to a slightly larger percentage of commercial business over defense business of Boeing (54% vs 46%).

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