The-Cost-of-Capital-for-Everest-Bank-limited-GROUP-4.docx - The Cost of Capital for Everest Bank limited By Group 4 Aditi Upadhyaya poudel Amar Nath

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The Cost of Capital for Everest Bank limited By Group 4 Aditi Upadhyaya poudel Amar Nath Shrestha Jasmine Shrestha Nawaraj Nepal Sophie Pradhan A term paper submitted in partial fulfillment of the requirement for the degree of Undergraduate program on Bachelor in Business Administration At Kathmandu College of Management (KCM) Siam University 2016
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Acknowledgement We would like to extend our deepest appreciation to our financial management teacher, Mr. Sitaram Dhakal for assigning us with such an interesting as well as educative project work on the cost of capital. This will not only help us in calculating the cost of capital but will also give us a practical and realistic approach as to how it is analyzed and interpreted in case of banks and other financial institutions. Lastly, we would appreciate the efforts of all our friends who helped us and without whom; this report would not have been a success. ThankYou.
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Table of Contents Acknowledgement ........................................................................................................................... 2 Introduction ...................................................................................................................................... 4 Everest Bank Limited (EBL) ....................................................................................................... 4 Cost of capital .............................................................................................................................. 4 Cost of Debt: ............................................................................................................................ 5 Cost of Equity .......................................................................................................................... 6 Cost of Preferred Stock: ........................................................................................................... 7 Factors affecting Cost of capital ...................................................................................................... 9 Calculations ................................................................................................................................... 11 Findings and Recommendations .................................................................................................... 14 Conclusion ..................................................................................................................................... 16
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Abbreviation EBL Everest Bank Limited PNB Punjab National Bank ATM Automated Teller Machine CAMELS Capital Adequacy, Assets, Management Capability, Earnings, Liquidity, Sensitivity CAPM Capital Asset Pricing Model K ps Cost of preferred stock K d Cost of debt Ke Cost of equity WACC Weighted Average Cost of Capital
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Introduction Everest Bank Limited (EBL) Everest Bank Limited (EBL) was founded in 1994, one of the leading bank of Nepal. The bank has 61 Branches, 84 ATM Counters, 5 extension counter and 22 Revenue Collection Counters across the country. EBL is one of the very efficient and accessible bank n Nepal[Eve16]. Punjab National Bank (PNB) is their joint venture partner who is the largest nationalized bank in India. They are holding 20% equity of Everest Bank Limited. It has been successful to place themselves as number 1 bank under CAMELS rating conducted by Karobar national daily[Eve16].EBL’s major objective is to use the latest technology for an effective change for socio-economic development. Cost of capital Cost of capital simply means the minimum return that must be generated from the investment of the corporation. It can be said as the opportunity cost of making a specific investment[Inv161]. It is the rate of return that could have been earned by managing the risk by diversification as well.
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