Johnson Controls

The NPV of an investment proposal is found by adding the present values of all of its estimated

NPV analysis uses future cash flows to estimate the value that a project could add to a firm’s shareholders. A company director or shareholders can be clearly provided the present value of a long-term project by this approach. By estimating a project’s NPV, we can see whether the project is profitable. Despite NPV analysis is only based on financial aspects and it ignore non-financial information such as brand loyalty, brand goodwill and other intangible assets, NPV analysis is still the most popular way evaluate a project by companies.

Finally, in order to complete a more accurate comparison between the two projects, we utilized the EANPV as the deciding factor. Under current accepted financial practice, NPV is generally considered the most accurate method of predicting the performance of a potential project. The duration of the projects is different, one lasts four years and one lasts six years. To account for the variation in time frames for the projects and to further refine our selection we calculated the EANPV to compare performance on a yearly basis.

2. Net Present Value – Secondly, Peter needs to investigate the Net Present Value (NPV) of each project scenario, i.e. job type, gross margin, and # new diamonds drills purchased. The NPV will measure the variance of the present value of cash outflow (drilling equipment investment) versus the future value of cash inflows (future profits), at the benchmark hurdle rate of 20%. A positive NPV associated with the investment means that the investment should be undertaken as it exceeds the minimum rate of return. A higher NPV determines which project scenario will have the highest return on cash flow, hence determining the most profitable investment in terms of present money value.

Evaluating the risks, calculating the probability of success, and factoring in the projected profit from sales will provide a clearer NPV to be compared with other projects in the

b) The decision to invest in projects increases the shareholders value of the company. This is consistent with the growth and from the NPV criteria, positive NPV of projects increases the shareholder's value.

John H. Johnson created a name for himself as a very successful Publisher and entrepreneur. Johnson was born in Arkansas City on January 19th, 1918. Johnson is most well known for being the founder of Jet magazine, and Ebony two very popular and successful magazines in the African American community.

d) Information systems charge-backs (both cost reduction and additional expenses) – Only costs associated with each of the different projects should be included in the NPV analysis. For instance, research regarding which system should be purchased would be considered to be a sunk cost and should not be included in the analysis as an incremental cash flow. On the other hand, the cost reduction of each project should be included in the NPV analysis, since the reductions will greatly affect the NPV of each project.

The operation manager for JBI suggested considering that Saver Superstore is an easy to deal with partner unlike some other customers that make the business spent a lot of time on their rush orders .This comment brought Johnson to wonder about the customer service costs structure and allocation system. The current system allocates these costs based the revenue generated by each customer which assign a large share to Saver Superstore the biggest one.

Account for time. Time is money. We prefer to receive cash sooner rather than later. Use net present value as a technique to summarize the quantitative attractiveness of the project. Quite simply, NPV can be interpreted as the amount by which the market

Net Present Value (NPV) calculates the sum of discounted future cash flows and subtracting that amount with the initial investment of the project. If the NPV of a project results in a positive number, the project should be undertaken. It is the most widely used method of capital budgeting. While discount rate used in NPV is typically the organization’s WACC, higher risk projects would not be factored in into the calculation. In this case, higher discount rate should be used. An example of this is when the project to be undertaken happens to be an international project where the country risk is high. Therefore, NPV is usually used to determine if a project will add value to the company. Another disadvantage of NPV method is that it is fairly complex compared to the other methods discussed earlier.

When a fire alarm sounds in the building, the fire indicator board will indicate the location of where the alarm has been sound off. This will allow easy verification of the validity of the alert by building personnel. If it happens to be false alarm, fire monitoring provider (DECAM) operator will be notified. In this case, Johnson Controls (S) Pte Ltd is the DECAM provider engaged by the management of SIT. If the alarm has been verified to be a real fire breakout, the building personnel of USC will contact DECAM operator to update on the actual situation. DECAM operator will then contact the fire fighting unit immediately.

Johnson and Johnson is a very well known brand name, which many people connect to medical and hygiene products such as soaps. To fulfill a lot of their projects and designs, engineers are needed. Most of the engineers that they hire are mechanical to work on machinery and manufacturing, industrial to streamline production and manufacturing, and chemical to know the essence of their products. Johnson and Johnson also hire biomedical engineers, which would be any number of bachelors degrees carried on into a hire level. Seeing as Johnson and Johnson are a medical and hygiene based company, a lot of the projects the engineers’ work on would involve making sure that products are manufactured in their safest and most effective way possible. Some of the projects that they have highlighted are the utilization of new and innovative technology to improve body systems, such as the circulatory system. They are also creating new technology to replace joints and replicate human organs. Engineers are also in charge of making sure that pharmaceuticals are created and sold safely and efficiently. Because of their large contribution in these projects, Johnson and Johnson would be considered a large contributor to the medical industry. The company is based out of more than 60 countries and has a headquarters in New Brunswick, New Jersey.

In the case of Worldwide Paper Company we performed calculations to decide whether they should accept a new project or not. We calculated their net income and their cash flows for this project (See Table 1.6 and 1.5). We computed WPC’s weighted average cost of capital as 9.87%. We then used the cash flows to calculate the company’s NPV. We first calculated the NPV by using the 15% discount rate; by using that number we calculated a negative NPV of $2,162,760. We determined that the discount rate of 15% was out dated and insufficient. To calculate a more accurate NPV for the project, we decided to use the rate of 9.87% that we computed. Using this number we got the NPV of $577,069. With the NPV of $577,069 our conclusion is to accept this

Mutually exclusive projects are another situation for which NPV must extend its approach. In such projects, the chosen project is usually one which results in the greatest positive NPV because this will produce the greatest addition to shareholders’ wealth. In the case of mutually exclusive investments, ranking becomes crucial as only