What is the payback period for the Boeing 787 Dreamliner project? The Boeing 787-8 can carry 230 passengers up to 8,200 nautical miles at a cruising speed of mach 0.85. The Dreamliner is more comfortable for passengers because of higher cabin humidity. Boeing completed construction of its final assembly plant in Everett Washington in December 2007 at a total cost of $7B. Boeing has secured sales of 865 aircraft over the period 2008-2012 for total proceeds of $138.4B ($160M per aircraft). The cost of building each plane is $140M. Assume that sales (and costs)occur in December of each year. Assume that sales are spread evenly across the five years from 2008-2012. The project cash flows are shown in the table, below. What is the payback period for the project? Ignore taxes. $$\begin{array} { | c | c | c | c | c | c | }
\hline \text { Year } & \begin{array} { c }
\text { Capital } \
\text { Investment }
\end{array} & \text { Annual Sales } & \begin{array} { c }
\text { Annual } \
\text { Revenues }
\end{array} & \text { Annual Costs } & \text { Cash Flows } \
\hline 2007 & - \$ 7,000 \mathrm { M } & & & & - \$ 7,000 \
\hline 2008 & & 173 & \$ 27,680 & \$ 24,220 & \$ 3,460 \
\hline 2009 & & 173 & \$ 27,680 & \$ 24,220 & \$ 3,460 \
\hline 2010 & & 173 & \$ 27,680 & \$ 24,220 & \$ 3,460 \
\hline 2011 & & 173 & \$ 27,680 & \$ 24,220 & \$ 3,460 \
\hline 2012 & & 173 & \$ 27,680 & \$ 24,220 & \$ 3,460 \
\hline
\end{array}$$

Question

What is the payback period for the Boeing 787 Dreamliner project? The Boeing 787-8 can carry 230 passengers up to 8,200 nautical miles at a cruising speed of mach 0.85. The Dreamliner is more comfortable for passengers because of higher cabin humidity. Boeing completed construction of its final assembly plant in Everett Washington in December 2007 at a total cost of $7B. Boeing has secured sales of 865 aircraft over the period 2008-2012 for total proceeds of $138.4B ($160M per aircraft). The cost of building each plane is $140M. Assume that sales (and costs)occur in December of each year. Assume that sales are spread evenly across the five years from 2008-2012. The project cash flows are shown in the table, below. What is the payback period for the project? Ignore taxes. $$\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Capital } \
\text { Investment }
\end{array} & \text { Annual Sales } & \begin{array} { c } 
\text { Annual } \
\text { Revenues }
\end{array} & \text { Annual Costs } & \text { Cash Flows } \
\hline 2007 & - \$ 7,000 \mathrm { M } & & & & - \$ 7,000 \
\hline 2008 & & 173 & \$ 27,680 & \$ 24,220 & \$ 3,460 \
\hline 2009 & & 173 & \$ 27,680 & \$ 24,220 & \$ 3,460 \
\hline 2010 & & 173 & \$ 27,680 & \$ 24,220 & \$ 3,460 \
\hline 2011 & & 173 & \$ 27,680 & \$ 24,220 & \$ 3,460 \
\hline 2012 & & 173 & \$ 27,680 & \$ 24,220 & \$ 3,460 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The payback period is the amount of time it takes for the project to generate enough cash flow to cover the initial investment. In this case, the initial investment is $7 billion. The project generates $3.46 billion in cash flow each year, so the payback period is $7 billion / $3.46 billion = 2.02 years.

What Is the Payback Period for the Boeing 787 Dreamliner