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Essay / Research Paper Abstract
This 4 page paper examines capital budgeting at Entergry Corp., looking at general capital budgeting issues including risk management, capital requirements, valuation of innovatory and presents a sample NPV calculation. The bibliography cites 4 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEentergry.rtf
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Unformatted sample text from the term paper:
way capital is used has opportunity costs, as such risk needs to be assessed (Nellis and Parker, 2000). The risk is not limited to financial risk, but other elements of
risk that will impact on the financial performance of the company. Looking at the way budgeting is taking place there is a caveat in place where the company is required,
under agreements with its creditors to keep a minimum of 35% of the total capitalization as equity capital (Entergry Corp, 2008). This requires careful budgeting as there will be variations
in the level of capitalization as the share price fluctuates. The stratagem has been to increase the equity and reduce debt, the debt to capital ratio has been improved
as the firm have retained earning, however, this has also been partially offset with the share repurchases that have been taking place (Entergry Corp, 2008). The approach to risk appears
to be one of long term careful investments; this is seen with the capital investments that have been chosen. Current investments are looking towards newer and more efficient methods of
energy production, including large investment in nuclear power generation (Entergry Corp, 2008). The plan to spin off the non utility nuclear operations is likely to have an impact on the
capital budgeting as a separate firm there may be different budging constraints due to caveats from lenders. However, in all cases there is the need to determine whet ere or
not there will be a positive return and to assess if the investment is one of the best choices. An approach that appears to be used is that of net
present value. An example of this is shown at the end of the paper. There are also risks inherent in the way
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