finance-620

1. EXECUTING & REPORTING FINANCIAL MARKET
TRANSACTIONS
FINC 620
The Boeing Company (BA)
Submitted By
DHAIRYA FURIA
ROHAN MACHADO
SUJIT KURIEN
RAHUL JADHAV
DOJENDRA

2. 1. Company Background
The Boeing Company, together with its subsidiaries, designs, develops, manufactures, sells, services, and
supports commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch
systems and services worldwide. The Company was founded in 1916 and is based in Chicago, Illinois.
The company operates in five segments:
1. The Commercial Airplanes segment develops, produces, and markets commercial jet aircraft for
various passenger and cargo requirements, as well as provides related support services to the
commercial airline industry. This segment also offers aviation services support, aircraft
modifications, spares, training, maintenance documents, and technical advice to commercial and
government customers.
2. The Boeing Military Aircraft segment is involved in the research, development, production, and
modification of manned and unmanned military aircraft and weapons systems for the global strike
and vertical lift, and unmanned airborne systems programs, as well as mobility, surveillance, and
engagement.
3. The Network & Space Systems segment engages in the research, development, production, and
modification of electronics and information solutions; strategic missile and defense systems; space
and intelligence systems; and space exploration products.
4. The Global Services and Support segment offers integrated logistics, including supply chain
management and engineering support; maintenance, modification, and upgrades for aircraft; and
training systems and government services, such as pilot and maintenance training.
5. The Boeing Capital segment facilitates, arranges, structures, and provides financing solutions,
such as equipment under operating leases, finance leases, notes and other receivables, assets held
for sale or re-lease, and investments for its commercial airplanes customers.
Key Financial Statistics:
 Market Cap: $102.95 Billion
 Stock Price: $146.15 as of April 29, 2015
 P/E Ratio: 18.46
 EPS: 7.99
 Dividend: $3.64
 Dividend Yield: 2.40%
 Profit Margin: 6.29%
 Return on Equity: 51.34%
 Total Debt: $9.04 Billion

3. 2. Financial Statements
Segment-Wise Revenue and Earnings
Years ended
December 31,
2010 2011 2012 2013 2014
Amount % Amount % Amount % Amount % Amount %
Growth rate 6.89% 18.86% 6.03% 4.78%
Revenues:
Commercial
Airplanes
$31,834 49.50% $36,171 52.62% $49,127 60.13% $52,981 61.16% $59,990 66.10%
Defense,
Space &
Security:
Boeing
Military
Aircraft
14,238 22.14% 14,947 21.75% 15,388 18.84% 15,285 17.65% 13,511 14.89%
Network &
Space
Systems
9,449 14.69% 8,654 12.59% 7,911 9.68% 8,512 9.83% 8,003 8.82%
Global
Services &
Support
8,256 12.84% 8,375 12.18% 9,308 11.39% 9,400 10.85% 9,367 10.32%
Total
Defense,
Space &
Security
31,943 49.67% 31,976 46.52% 32,607 39.91% 33,197 38.32% 30,881 34.02%
Boeing
Capital
729 1.13% 620 0.90% 468 0.57% 408 0.47% 416 0.46%
Unallocated
items,
eliminations
and other
-200 -0.31% -32 -0.05% -504 -0.62% 37 0.04% -525 -0.58%
Total
revenues
$64,306 100.00% $68,735 100.00% $81,698 100.00% $86,623 100.00% $90,762 100.00%
Earnings
from
operations:
Commercial
Airplanes
$3,006 60.47% $3,495 59.80% $4,711 74.90% $5,795 88.31% $6,411 85.79%
Defense,
Space &
Security:
Boeing
Military
Aircraft
1,250 25.15% 1,526 26.11% 1,487 23.64% 1,504 22.92% 1,304 17.45%
Network &
Space
Systems
705 14.18% 679 11.62% 562 8.93% 719 10.96% 698 9.34%
Global
Services &
Support
920 18.51% 953 16.31% 1,019 16.20% 1,012 15.42% 1,131 15.13%
Total
Defense,
Space &
Security
2,875 57.84% 3,158 54.04% 3,068 48.78% 3,235 49.30% 3,133 41.92%
Boeing
Capital
152 3.06% 113 1.93% 88 1.40% 107 1.63% 92 1.23%

4. Unallocated
items,
eliminations
and other
-1062 -21.36% -922 -15.78% -1,577 -25.07% -2,575 -39.24% -2,163 -28.94%
Earnings
from
operations
4,971 100.00% 5,844 100.00% $6,290 100.00% $6,562 100.00% $7,473 100.00%
Other
(loss)/income,
net
52 1.05% 47 0.80% 62 0.99% 56 0.85% -3 -0.04%
Interest and
debt expense
-516 -10.38% -498 -8.52% -442 -7.03% -386 -5.88% -333 -4.46%
Earnings
before
income taxes
4,507 90.67% 5,393 92.28% 5,910 93.96% 6,232 94.97% 7,137 95.50%
Income tax
expense
-1196 -24.06% -1,382 -23.65% -2,007 -31.91% -1,646 -25.08% -1,691 -22.63%
Net earnings
from
continuing
operations
3,311 66.61% 4,011 68.63% 3,903 62.05% 4,586 69.89% 5,446 72.88%
Net loss on
disposal of
discontinued
operations,
net of taxes
of $0, $0, $2
-4 -0.08% 7 0.12% -3 -0.05% -1 -0.02% 0 0.00%
Net earnings $3,307 66.53% $4,018 68.75% $3,900 62.00% $4,585 69.87% $5,446 72.88%
Consolidated Statements Of Financial Position
(USD $)In Millions, unless
otherwise specified
Dec. 31, 2014 Dec. 31,
2013Assets
Cash andcash equivalents $11,733 $9,088
Short-termandother
investments
1,359 6,170
Accountsreceivable,net 7,729 6,546
Currentportionof
customerfinancing,net
190 344
Deferredincome taxes 18 14
Inventories,netof
advancesandprogress
billings
46,756 42,912
Total currentassets 67,785 65,074
Customerfinancing,net 3,371 3,627
Property,plantand
equipment,net
11,007 10,224
Goodwill 5,119 5,043
Acquiredintangible
assets,net
2,869 3,052
Deferredincome taxes 6,576 2,939
Investments 1,154 1,204
Otherassets,netof
accumulatedamortization
of $479 and$448
1,317 1,500
Total assets 99,198 92,663
Liabilitiesandequity
Accountspayable 10,667 9,498
Accruedliabilities 13,343 14,131
Advancesandbillingsin
excessof relatedcosts
23,175 20,027
Deferredincome taxes
and income taxespayable
8,603 6,267
Short-termdebtand
currentportionof long-
termdebt
929 1,563
Total currentliabilities 56,717 51,486

5. Accruedretiree health
care
6,802 6,528
Accruedpension plan
liability,net
17,182 10,474
Non-currentincome taxes
payable
358 156
Otherlong-termliabilities 1,208 950
Long-termdebt 8,141 8,072
Shareholders' equity:
Commonstock,par value
$5.00 – 1,200,000,000
sharesauthorized;
1,012,261,159 shares
issued
5,061 5,061
Additional paid-incapital 4,625 4,415
Treasurystock,at cost -23,298 -17,671
Retainedearnings 36,180 32,964
Accumulatedother
comprehensive loss
-13,903 -9,894
Total shareholders equity 8,665 14,875
Noncontrollinginterests 125 122
Total equity 8,790 14,997
Total liabilitiesandequity $99,198 $92,663
FCFF Calculation
2013 2014 2015 2016 2017
Sales Growth rate 4.78% 10% 7% 5%
NOPAT 4585 5446 5991 6410 6730
NOWC 34917 42208 46429 49679 52163
TOC 45141 53215 58537 62634 65766
NIOC 8074 5322 4098 3132
FCFF -2628 669 2312 3599
FCFF growth 125.46% 245.60% 55.63%
ROIC 10.16% 10.23% 10.23% 10.23% 10.23%
WACC 8.40% 8.40% 8.40% 8.40% 8.40%

6. 3. Bond Details
Issue Size: $750 Million
Par Value: $1000
Coupon Rate: 4.875%
Coupon Type: Fixed
Coupon Frequency: Semi-Annually
Issue Date: 02/15/2010
Maturity Date: 02/15/2020
Payment Currency: US Dollar
Benchmark Treasury: US Treasury 10-20 year yield USD
Yield Spread: -0.39%
Treasury Yield: 2.32%
4. Bond Analysis
Semi-Annual Bond : N = 10*2=20 , Rd= 5/2= 2.5%
Effects on the Value of the Bond if expected inflation rate rises or falls

7. The Value of the 10-year bond if the required rate of return remained at 3%,5%,7% &
10%
Value of Bond for every 6 month period
N 3% 5% 7% 10%
0 ₹1,160.96 ₹990.26 ₹848.99 ₹680.66
1 ₹1,154.00 ₹990.64 ₹854.33 ₹690.31
2 ₹1,146.93 ₹991.03 ₹859.86 ₹700.45
3 ₹1,139.76 ₹991.43 ₹865.58 ₹711.10
4 ₹1,132.48 ₹991.84 ₹871.50 ₹722.28
5 ₹1,125.09 ₹992.26 ₹877.63 ₹734.02
6 ₹1,117.59 ₹992.69 ₹883.97 ₹746.35
7 ₹1,109.98 ₹993.14 ₹890.53 ₹759.29
8 ₹1,102.26 ₹993.59 ₹897.33 ₹772.88
9 ₹1,094.42 ₹994.05 ₹904.36 ₹787.15
10 ₹1,086.46 ₹994.53 ₹911.64 ₹802.13
11 ₹1,078.38 ₹995.02 ₹919.17 ₹817.86
12 ₹1,070.18 ₹995.52 ₹926.96 ₹834.38
13 ₹1,061.86 ₹996.03 ₹935.03 ₹851.72
14 ₹1,053.41 ₹996.56 ₹943.38 ₹869.94
15 ₹1,044.84 ₹997.10 ₹952.03 ₹889.06
16 ₹1,036.13 ₹997.65 ₹960.97 ₹909.14
17 ₹1,027.30 ₹998.21 ₹970.23 ₹930.22
18 ₹1,018.34 ₹998.80 ₹979.82 ₹952.35
19 ₹1,009.24 ₹999.39 ₹989.73 ₹975.60
20 ₹1,000.00 ₹1,000.00 ₹1,000.00 ₹1,000.00
Effect of interest rate on bond with different maturities
7-Yr Maturity 10-Yr Maturity 5-Yr Maturity

8. Rate Price Rate Price Rate Price
$992.77 $990.35 $994.59
1.0% 1,260.72 1.0% $1,367.01 1.0% $1,188.07
3.0% 1,116.82 3.0% $1,159.94 3.0% $1,085.87
5.0% 992.77 5.0% $990.35 5.0% $994.59
7.0% 885.48 7.0% $850.75 7.0% $912.87
10.0% 750.49 10.0% $685.09 10.0% $805.72
You can see that as the interest rate goes from 1% to 10%, the price changes are bigger for a 10-
year bond.
rd 5-Year P Change 10-Year P Change
1.0% $1,188 $1,367
19.5% 38.0%
5.0% $995 $990
23.4% 44.6%
10.0% $806 $685
5. Stock Analysis
Risk free rate=2% , Rm = 8% , b = 0.89
$700.00
$800.00
$900.00
$1,000.00
$1,100.00
$1,200.00
$1,300.00
$1,400.00
$1,500.00
1.0% 3.0% 5.0% 7.0% 10.0%
YTM
10 Yr. versus 5 Yr.
Your Choice

9. Cost of Capital (rs) = rRF + b (rM – rRF)
= 2% + 0.89(8% - 2%)
= 2% + 0.89 (6%)
= 7.34%
Constant Growth Model
Current Stock Price = P0 = $119.51
Stock Price 1 year from now:
P1 = D2 / ( rs – g )
D2 = D1 (1+g) = $3.2058
P1 = $3.2058 / 0.0256
P1 = $125.23
Dividend Yield = D1/P0 CG Yield = (P1 – P0)/ P0
Dividend Yield = $3.06 / $119.51 CG Yield = $5.71 / $119.51
Dividend Yield = 2.56% CG Yield = 4.78%
Total Yield = Dividend Yield + CG Yield
Total Yield = 7.34%
What percentage of the stock price is based on long term and short term expectations
Year (t) 0 1 2 3

10. Dt = D0 (1+g)t $3.0596 $3.2058 $3.3591
PV(Dt) = Dt/(1+rs)t $2.8504 $2.7824 $2.7160
Sum of PV(Divs.) $8.35
P0 $119.51
% of P0 due to 3
PV(Divs.)
7%
% of P0 due to long-
term divs.
93%
Effect on the Stock Price when ‘g’ & ‘r’ fall or rise
Growth Rate: g Required Return: rs
5.3% 6.3% 7.3% 8.3% 9.3%
4% $194.25 $118.37 $85.12 $66.46 $54.50
5% $546.35 $196.13 $119.51 $85.94 $67.10
6% -$701.99 $551.57 $198.00 $120.66 $86.76
Value of the stock if the growth rate is not constant
Current Stock Price = $293.86  $294

11. Expected Dividend and CG Yields at t = 0
Dividend Yield = 1.2%
CG Yield = 6.1%
Total Return = 7.3%
Expected Dividend and CG Yields at t = 3
Dividend Yield = 0.0%
CG Yield = 7.3%
Total Return = 7.3%
Valuation of Stock Price
INPUTS:
Value of operations = $92,668.04
Value of nonoperating assets = $1,359.00
All debt = $8,141.00
Preferred stock = $0.00
Number of shares of common stock = 1000.00

12. ESTIMATING PRICE PER SHARE
Value of operations $92,668.04
+ Value of nonoperating assets 1,359.00
Total estimated value of firm $94,027.04
− Debt 8,141.00
− Preferred stock 0.00
Estimated value of equity $85,886.04
÷ Number of shares 1,000.00
Estimated stock price per share = $85.89
6. Conclusion
We can confer from the above analysis, that Boeing is a very solid and stable company. From the
financial statements, we can see that the revenue and earnings have been growing at a good rate &
the cash flow is positive and growing. Boeing is constantly increasing it’s commercial segment and
cutting back on costs from it’s lagging defence segment. It’s Return on Invested Capital (ROIC) is
also greater than the Weighted Average Cost of Capital (WACC), this means that they are creating
value by investing in their operations. But from the stock valuation and looking at the P/E Ratio,
we can conclude that Boeing’s stock is a bit overpriced. But it is still a safe investment as Boeing
pays a dividend yield of over 2% and it has positive prospects to keep on growing.
Comparing the performance of Boeing’s bond with it’s stock, we can say that investing in bonds
would be a better option as they provide an ongoing return on investment at a rate of 4.875% and
you receive the face value on maturity. Any return rates generated by a bond investment equals a
percentage of the bonds original price, which means that the bonds rate of return remains
relatively consistent so there is little risk of losing the initial investment amount unless the
company goes under. The effects of interest rate and inflation rate changes are also comparatively
less on bonds than that on stocks, thus making bonds less risky whereas, stock investments have
virtually no limit on how high or low they can go in terms of market value.
7. References
 http://quicktake.morningstar.com/StockNet/Bondsquote.aspx?cid=0C000006YX&bid=f407
21b9917c0e66a96e2c5d760df708&bname=Boeing+4.875%25+%7c+Maturity%3a2020&ti
cker=BA&country=USA&clientid=dotcom
 https://www.sec.gov/cgi-bin/browse-
edgar?action=getcompany&CIK=0000012927&owner=exclude&count=40&hidefilings=0
 Mini Case Study : Chapter 5 & 7.