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Johnson Controls Inc Stock Evaluation: market cap, risk, premium, beta, value

The stock chosen is Johnson Controls INC (JCI). The calculations should be done in excel. Please answer the following questions.

Market Capitalization Rate.

What is your market capitalization rate?

What did you choose for a risk free rate? Why?

What did you choose for a market risk premium? Why?

How did you select/determine the appropriate beta?


How did you calculate your stock's intrinsic value? How did you arrive at a terminal value? What was your terminal value? What were your results?

How do your results compare to the stock's current price? According to your calculations, is your stock overpriced, underpriced, or correctly-priced?

Solution Preview


In computing the values required, the latest SEC filing of JCI was used which is it's 10-K for the year ended September 30, 2009.

What is your market capitalization rate?
Market capitalization rate is the expected return on a security. This is the market consensus estimate of the appropriate discount rate for an assets or stock's cash flow.

Cash flows from operating activities = $917 million
Weighted average outstanding common stocks = 593 million
Operating cash flows per common share = $917 million/593 million = $1.55
Closing price on JIC stocks on September 30, 2009 = $25.56

Market capitalization rate = $1.55/$25.56 = 6.06%

What did you choose for a risk free rate? Why?
The risk free rate is the September 30, 2009 interest yield on a three-month US treasury bill which was 0.14%.

This is the ...

Solution Summary

The expert examines Johnson Controls Inc stock evaluation for market capital, risk and premium. The beta value is determined.