Johnson Controls

Johnson Controls was founded in 1885 by Warren Johnson, who was the inventor of the first electric room thermostat. This company was based out of Milwaukee, Wisconsin and is now a global leader in the building and automotive industries. It has more than 1300 locations worldwide in more than 150 countries with over 170,000 employees, and is traded on the New York Stock Exchange under the symbol JCI. The company is made up of three major sections: Building Efficiency, Automotive Experience, and Power Solution. They are innovative and committed to sustainability all while accelerating into the global market ("A global leader," 2013).

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.

Capital investments are evaluated by different methodologies depending upon the nature of risk and projects. There are three most popular traditional approaches to gauge the effectiveness of the investment. These approaches are; payback period, internal rate of return and net present value. Out of these approaches, NPV and IRR are the most popularly used by investors and companies (Weygandt, Kimmel & Kieso, 2012). With that said, a methodology that Johnson Controls could use to help in evaluating capital budget investments is net present value. Net present value is the widely used method by the academicians, investors and financial managers to compare and select from a pool of investments. It is a procedure to calculate the present value of a number of future cash flows, caused by an investment. The methodology is to discount the present value through rate of all cash flows of the project future. This value is subtracted from the initial investment so that their obtained value is the net present value of the project. This concept is superior in the existing scheme as it calculates the value of the project in monetary terms ("Net...