Académique Documents
Professionnel Documents
Culture Documents
Shraddha Nepal
Westcliff University
2
Abstract
This paper comprises two different part i.e. part 1 and part 2. In the first part I have selected
Nepal SBI Bank Limited, its financial statement which includes income statement and balance
sheet of this bank for calculating average rate and return, beta and weighted average cost of
capital. The data of Nepal Stock Exchange (NEPSE) is used for computing beta. Whereas, in part
two I have selected four diversified companies’ data (Prime Life Insurance, Unilever Nepal
Limited, Chilime Hydropower and Soaltee Hotel) which is used in CLA2 assignment.
3
Introduction
Cost is the backbone for any organization whether to start the business, operate and
manage the business, development or rebound from the crisis period. The organization should
not disregard the cost of organization or avoid it. It will not be good enough to operate the
company just to have a fantastic idea of market at least initial investment is needed. The owner’s
capital is not adequate sometime for an investment for an investment when investing in a firm.
There are various funding outlets for raising fund which is equity and debt. It is important
for company individual to realize that the company needs to pay cost of capital throughout
interest borrowing, dividend of cash and other interests that organization pay when gathering
fund from debt and equity. The financial department is assessed to determine and collect fund as
necessary. Beta is used to measure the company’s value risk with the market value risk. WACC
is commonly used for determining and collecting fund if necessary. It is further used to analyze
whether to invest in several portfolio or not and helps to access the cost of capital of each
portfolio. The greater the WACC, t he more expensive the business or portfolio.
4
NEPS
E Calculation of Beta
Date NEPSE Change in value
Correlation 0.08067
The standard deviation, variance, covariance, correlation between market rate of return
and average rate of return was computed in the excel sheet. We know that beta measures the
systematic risk. In the case of SBI bank we can see that the beta is less than 1 so the systematic
= 3028341567/14745352139
=0.20
Beta=0.00913
Tax rate= 30% (Tax rate of Government of Nepal for financial institutions and banks)
=0.0104
The rate of Treasury bill as per the central bank of Nepal NRB is 1.1285
=21.98%
Here, the rate of return using CAPM is more than the average rate of return.
=3028341567/(3028341567+8956295554)
= 0.2526
DEBT
cost of debt 10% Debt 3028341567
Weight of
debt 0.1704 Equity 14745352139
Total 17773693706
Equity
Weight of
equity 0.8296
risk free rate
% 1.13%
Expected
return 18.03%
Beta 0.0091
Cost of equity
% 0.0128
WACC 2.77%
Part 2
For the reference for CLA2 assignment I have selected four diversified companies
insurance, manufacturing, hotel and hydropower. The data required for the assignment is
presented below:
Prime Life Insurance
Date Price Annual return Change in value
2020 7 15 531 15% 21.23%
2019 7 15 448 18% -17.82%
2018 7 15 533 12.5% -80.25%
2017 7 15 2699 12.5% 22.68%
2016 7 15 2200 12.5% 91.64%
2015 7 15 1148 13.1562% 4.46%
2014 7 15 1099 25% 307.04%
2013 7 15 270 13% 42.11%
2012 7 15 190 21.05% 11.11%
2011 7 15 171
9
Chilime Hydropower
Date Annual Return Price Change in return
2020 7 15 25% 398 10.71%
2019 7 15 25% 519 30.88%
2018 7 15 25% 754 126.70%%
2017 7 15 20% 795 -41.56%
2016 7 15 27% 1440 -8.75%
2015 7 15 35% 1578 -44.79%
2014 7 15 40% 2700 -5.16%
2013 7 15 50% 1191 -31.17%
2012 7 15 70% 910 23.31%
2011 7 15 822
10
References
https://www.sharesansar.com/announcementdetail/nepal-sbi-bank-limited-has-posted-a-
11
net-profit-of-rs-153-billion-and-published-its-4th-quarter-company-analysis-of-the-fiscal-
year-207677
https://www.sharesansar.com/announcementdetail/chilime-hydropower-company-
limited-has-posted-a-net-profit-of-rs-74805-million-and-published-its-4th-quarter-
company-analysis-of-the-fiscal-year-207677
https://www.sharesansar.com/announcementdetail/chilime-hydropower-company-
limited-has-posted-a-net-profit-of-rs-74805-million-and-published-its-4th-quarter-
company-analysis-of-the-fiscal-year-207677
https://www.sharesansar.com/announcementdetail/prime-life-insurance-company-
limited-has-posted-a-net-profit-of-rs-29856-million-and-published-its-4th-quarter-
company-analysis-of-the-fiscal-year-207677
https://www.sharesansar.com/announcementdetail/prime-life-insurance-company-
limited-has-posted-a-net-profit-of-rs-29856-million-and-published-its-4th-quarter-
company-analysis-of-the-fiscal-year-207677
12