ACC 560 Johnson Controls Capital Investments

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Assignment 2: Johnson Controls Capital Investments

Visit the Website of Johnson Controls Inc., located at http://www.johnsoncontrols.com, and review its 2012 financial forecasts. According to the forecasts, Johnson Controls will increase capital investments to approximately $1.7 billion. More than 70% of the company’s capital expenditures in 2012 are associated with growth and margin expansion opportunities.
Write a five to six (5-6) page paper in which you:
1. Suggest a methodology to supplement the traditional methods for evaluating the capital investments of Johnson Controls in the emerging markets to reduce risk providing a rationale of how risk will be reduced.
2. Assess the potential impact of inflation on planned capital investments in China and examine approaches for an accurate evaluation of the investments. Suggest how this knowledge may impact management’s decisions.
3. Contrast the modifications you would make in evaluating the projects to increase internal capacity in North America to evaluating expansion projects in the global market and how this information will impact the decisions made related to expansion.
4. Examine the benefits of using sensitivity analysis in evaluating the projects for Johnson Controls and how this approach can provide a competitive advantage for the company.
5. Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and other Websites do not quality as academic resources.
Your assignment must follow these formatting requirements:
 Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
 Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

Description

ACC 560 Johnson Controls Capital Investments,

Suggest a methodology to supplement the traditional methods for evaluating the capital investments of Johnson Controls in the emerging markets to reduce risk providing a rationale of how risk will be reduced.

Some of the methodologies to supplement the traditional methods for evaluating the capital investments are as follows:

  1. Payback period
  2. Accounting rate of return
  3. Net present value
  4. Internal rate of return

Payback period of an investment is the length of the time required for the cumulative total net cash flows from the investment to equal the total initial cash outlays.

Advantages of payback period technique are:

  1. It is easy to compute and understand.
  2. It serves as an estimate of a project’s risk.
  3. It focuses on quick payoffs.

Limitations of payback period technique are:

  1. It ignores time value of money.
  2. It only considers cash flows from the initiation of the project until its payback period and ignores cash flows after the payback period.
  3. It can be used only for comparison purpose but if there is a single project, decision cannot be taken.

This technique emphasizes on short payback p

Suggest a methodology to supplement the traditional methods for evaluating the capital investments of Johnson Controls in the emerging markets to reduce risk providing a rationale of how risk will be reduced.

Some of the methodologies to supplement the traditional methods for evaluating the capital investments are as follows:

  1. Payback period
  2. Accounting rate of return
  3. Net present value
  4. Internal rate of return

Payback period of an investment is the length of the time required for the cumulative total net cash flows from the investment to equal the total initial cash outlays.

Advantages of payback period technique are:

  1. It is easy to compute and understand.
  2. It serves as an estimate of a project’s risk.
  3. It focuses on quick payoffs.

Limitations of payback period technique are:

  1. It ignores time value of money.
  2. It only considers cash flows from the initiation of the project until its payback period and ignores cash flows after the payback period.
  3. It can be used only for comparison purpose but if there is a single project, decision cannot be taken.

This technique emphasizes on short payback p…………………………………………………………………………………….

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