Saturday, May 11, 2019

Johnson Controls Research Paper Example | Topics and Well Written Essays - 1250 words

Johnson Controls - Research wallpaper ExampleInformation system of ruless atomic number 18 also considered bulky-term capital coronation projects. The following are slightly of the traditional capital budgeting models used to evaluate capital projects The payback method The accounting prize of chip in on investment (ROI) The net present value The cost-benefit ratio The profitability index The internal rate of return (IRR) These methods rely on measures of cash flows into and out of the firm. Capital projects generate cash flows into and out of the firm. The investment cost is an immediate cash outflow caused by the purchase of the capital equipment (capital outlay). In subsequent periods, the investment may cause additional cash outflows related to repair and maintenance that will be equilibrise by cash inflows resulting from the investment. Cash inflows take the form of increased revenues generated from the improved facilities or reduced cost in production and operations. The difference between cash outflows and cash inflows (net cash flows) is used for calculating the pecuniary worth of an investment. Once the cash flows have been established, several alternative methods are available for comparing various projects and deciding about the investment. Financial models assume that all relevant alternatives have been examined, that all costs and benefits are kn avow, and that these costs and benefits can be expressed in a monetary terms. When one has to choose among many a(prenominal) complex alternatives, these assumptions are rarely met in the real world, although they may be approximated (Aggarwal, 2002). Tangible benefits can be quantified and assigned a monetary value. Intangible benefits, such as more efficient customer armed service or enhanced employee goodwill, can non be immediately quantified but may lead to quantifiable gains in the long run. Shim and Siegel (2008) argue that traditional capital budgeting has a number of challenges. The models do not express the risks and uncertainty of their own costs and benefits estimates cash flows are uncertain inflation may affect costs and benefits differently engineering scienceespecially information technologycan change during the course of the project, causing estimates to vary greatly nonphysical benefits are difficult to quantify. These factors wreak havoc with financial models. The difficulties of measuring intangible benefits give financial models an activity bias. Traditional approaches to valuing information systems investments tend to assess the profitability of individual systems projects for specific business functions. Theses approaches do not adequately address investments in IT infrastructure, testing new business models, or other enterprise-wide capabilities that could benefit the composition as a whole (Gregory, 1999). The traditional focus on the financial and technical aspects of an information system tends to overlook the social and organizational di mensions of information systems that may affect the true costs and benefits of the investment. However, there are other modern methods that can be used as alternatives to the traditional methods. One of the approaches is the option price or real options theory recognizes the interactions among option holders optimizing behavior, asset uncertainty, and market disciplines. Recently, the option pricing theory has been employ in the evaluation of nonfinancial assets or

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