Boeing: free cashflow growth

Boeing: free cashflow growth

Boeing is the world’s largest aerospace company and leading manufacturer of commercial jetliners, defence, space and security systems, and service provider of aftermarket support. As America’s biggest manufacturing exporter, the company supports airlines and U.S. and allied government customers in more than 150 countries. Boeing products and tailored services include commercial and military aircraft, satellites, weapons, electronic and defence systems, launch systems, advanced information and communication systems, and performance-based logistics and training.

Question

You have been provided with a spreadsheet of historical financial data which you can use to forecast the free cashflow for the next five years and produce a two stage DCF (discounted cash flow) valuation. The yellow cells are for you to forecast. I have done the forecasts for 2020 / 2021.

You will need to find the appropriate beta (unlevered) and risk-free rate. The return on the market to be used is 7%.

The answer should be in report format with all key assumptions to free cashflow growth forecasts explained. The report must contain a BUY or SELL recommendation. The report should include a 3-year performance chart with Lockheed Martin as the competitor and the S&P 500 as the market.

(60 marks)

From the share data tab and your research, outline Boeing’s share repurchase scheme and explain why companies buy their own shares. Calculate the average price paid for the repurchased shares and comment on the impact of the repurchase scheme.

(15 marks)

The coronavirus has put significant financial strain on many companies. Describe the possible ways in which Boeing has or will be able to access additional capital, how will each option impact shareholders. Rank the different options in order of cost to the company (shareholders).