'Lockheed management Essay\r'

'We examined the closing to invest in the Tri-Star couch by prediction the cash flow associated with the project for a ledger of 210 planes. We also asked what a valid estimate of the NPV of the Tri-Star project at a volume of 210 planes as of 1967 would be. We open up this to be -$584 M. This was clearly an unacceptable NPV for capital budgeting on the project. A meliorate-even analysis revealed that the project reached economic break-even with the end product of 275 planes at $12.5 M per unit but did non reach value break-even at that level of production. notwithstanding industry analysts predicting 300 units as Lockheed’s break-even sales point, at this level, net present value remained stingy to cover costs at negative $274 million.\r\nIf the community had performed a true value break-even analysis, guidance would form realized that roughly 400 Tri Star aircraft (about 67 per year for six years) costing somewhere among $11.75 million and $12 million per unit would maintain to be sold in order to break even. The investment decision made by Lockheed to keep up the Tri Star program was not a comely one. A true value analysis shows that at the production level of 210 units, the project would result in an economic loss of $584.05 million and a get ahead loss of $480 million. In addition to miscalculating the break-even level of production, Lockheed management overestimated the growth rate of air travel industry.\r\n'