REQUIRED INVESTMENTS 2000-2008 Source Line 1 Line 2 Line 3 Required Investment Exhibit 11 R&D Exhibit 11 Capital Expenditure Exhibit

11 Net Working Capital Total Cash Flows Line 4 Line 5 Line 6 Line 7 Line 8 Line 9 Line 10 Line 11 Line 12 Line 1 R&D Expense + Depreciation EBIT - Taxes of 38% EBIAT + Depreciation - Cap Ex - Incr Work Cap Free Cash Flow 11% 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 (25) (60) (95) (100) (100) (100) (100) 2000 2001 1,100 1,100 2002 2,200 250 150 2,600 2003 2,200 350 300 2,850 2004 2,200 350 300 2,850 2005 1,320 50 200 1,570 2006 880 100 50 1,030 2007 660 100 760 2008 440 100 540

Adding Line 5 back in Line 2 Line 3

(25)

(60)

(95)

(100)

(100)

(100)

(100)

Discount Rate Line 13 Line 14 Line 15 Discount Factor FCF * DF PV of Investment Present value of required investments

CASH FLOWS FROM SALES OF A3XX Line 16 Line 17 Line 18 Line 19 Line 20 Line 21 Line 22 Line 23 Line 24 Line 25 Line 26 Line 27 Price per Plane x Number of Planes Revenues x Operating Margin of 18% Operating Profit + Depr. Adjustment Adj Operating Profit - Taxes of 38% Annual Cash Flow Value of Perpetuity (2007) = Annual Cash Flow / (d - g) Discount rate (d) = 11% Growth rate (g) = 2% NET PRESENT VALUE OF 3XX PROJECT Line 28 Net Present Value of 3XX Project 225

18% 100

Present Value of Sales (Value of perpetuity (2007) discounted to 2000)

ANNUAL DEMAND FOR VLA UNDER DIFFERENT GROWTH AND CONVERSTION RATE ASSUMPTIONS

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

45% 12 16 22 26 33 41 51 62 76 93 113

CONVERSION RATE TO VLA 55% 65% 75% 12 13 13 17 18 19 22 24 26 29 31 34 36 40 44 46 51 56 57 63 70 70 79 87 86 97 107 106 118 131 128 144 160

85% 14 20 28 37 47 61 76 95 117 144 176

95% 14 21 29 39 51 65 83 103 128 157 192

GROWTH RATE IN DEMAND FOR LARGE AIRCRAFT

Reading the chart Suppose the demand for large aircraft grew at an annual rate of 5%. Suppose also that Airbus was able to capture 45% of that new demand with A3XX sales (meaning 55% would be served by 747's). The annual demand for VLA such as the A3XX would be 41 aircraft.