As Textron's production manager, you have been asked to offer an evaluation of the following:
A. If Textron chooses to discount these savings at a rate of 15% per year of useful life, considering only a 10 year planning horizon, what is the potential cost savings to the customer over the life of this plane? Evaluate the potential financial benefit to Textron of adding winglets to an existing corporate aircraft, if the cost to Textron of each winglet is $556,000 per craft, assuming that demand for corporate aircraft will allow Textron to increase the craft’s price by the full amount of the savings accruing to the customer (Aviation Partners Boeing, 2016).
B. The manager that originally brought this idea forward understood this addition of Winglets to represent a net increase in revenues of almost double of the price of the Winglet. As Textron's production manager, it is your opinion that this estimate may not encompass facts related to project production and financing. Using concepts covered in this and previous modules, analyze additional concepts that indicate other concerns that we might have in making this change, including the impact on other areas of financial policy. Calculate the rate of return that would make the net present value of this project equal to zero, and comment on its importance in terms of the impact of this project, through the diversion of existing resources, and on future growth and sustainability in the face of fluctuating revenues.
Offer critical analysis and comments for each of the two attached responses separately (Tania and Nicole) -File “505 4D1” with their take on the background information above and relate to their determinations and evaluations of Textron’s options.
Each response separate minimum 100 words each.
Sample Solution