Executive Summary A key factor in determining the viability of a project is its cost of capital [WACC]. Boeing's WACC estimate must be consistent with the overall valuation approach and with the definition of the cash flows to be discounted. Please note that this process is a forward-looking focus and is fraught with uncertainty. It is the way in which hypotheses are modeled that many costly mistakes can be made. When finding a rate of return for a single project, it is important to remember that the WACC is only appropriate for a single project. The numerous factors that influence WACC are: general economic conditions, market conditions, operational and financial decisions of the company, financing amount, business risk, ongoing financial risk and dividend policy. These factors have a direct impact on the variables used in the WACC calculation. These variables include the interest rate term structure, the risk-free rate, the beta, the market risk premium, the firm's marginal tax rate, and its capital structure. Since Boeing has two business components – defense and commercial – let's first start by determining the unlevered beta for its commercial component. This is achieved by comparing the average unlevered beta of Lockheed and Northrop which was 0.48. The next step is to derive Boeing's unlevered beta which was .47. 54% of Boeing's business is commercial; the appropriate beta for this segment was .46. We then proceed to detect the beta which turned out to be 1.03. The weighted average bond yield reported in Exhibit 11 was 5.29%. Using the book value D/E ratio and other relevant information provided in Exhibit 10, such as the risk-free rate or 4.56% and the given risk premium of 5%, the WACC for the project… a half of the document ...on net worth. Clearly all of these variables play an important role on a project's WACC and should be examined carefully. Despite the uncertainty and inherent risks, however, even if the WACC exceeds the IRR, the board may be wise to accept the project. Boeing is expected to have more expenses than revenue in the first few years. Revenue will come at a later date, when the 7E7 aircraft are delivered. The project will need to be evaluated periodically and management will need to make adjustments to ensure the company is profitable based on current and future conditions. The board's prerogative is not to give Airbus a "profit sanctuary" by not accepting the project, but rather to maintain or increase its market in the industry even if it is not profitable at first. Boeing has “small pockets” and should be willing to challenge its competitors.