Assignment, Finance I, BBA-BI 5th semester, Ace Institute of Management

1. Group Members:
•Anmol Pasa Shrestha
•Chhitiz Shrestha
•Pooja Shah
•Rashmita Regmi
•Sarala Bogati
•Sunita Shrestha

2. Introduction
• Constructed and owned by Chilime Hydropower
Company Limited
• located at 133 km north of Kathmandu at the right
bank of Bhotekoshi River in Rasuwa District
• installed capacity of 22.1 MW
• Delivers power via 38 km long 66 kV single circuit
transmission line at Trisuli Power House Switchyard
• The electricity generated from the power plant is
purchased by NEA and evacuated as per the PPA
made on June 25, 1997

3. Introduction
• First amendment made on December 10, 2007
• Annual deemed energy salable to NEA is 132.918
GWh
• The plant has started its commercial generation
from 8th Bhadra 2060 (24th August 2003).

4. Introduction

5. Purpose of the study
• Financial analysis of Chilime Hydropower Project
• Calculation of financial aspects like
Variance, Covariance, Beta and Expected rate of
return
• Interpretation of the data and findings
• Learn the actual approach of Beta and how is it used
by people
• Understanding the practical aspect of Capital Asset
Pricing Model
• Overall Profitability of Chilime Hydropower Project

6. Methodology
• Collected data from NEPSE index and data
provided by our finance instructor, Mr. Sarthak
Karki
• Used MS Excel to calculate
Variance, Covariance, Beta and the Rate of
return
• Collected relevant information abut the data and
the data calculation techniques from the internet

7. Calculation (Market index)
Date Market Index
• First of all the Jul-09 8715.8
monthly market data
Aug-09 8314.76
Sep-09 7907.95
were collected from Oct-09 7689.16
July 2009 to June Nov-09
Dec-09
7654.89
7411.35
2010. Jan-10 7286.97
• Then the average for Feb-10
Mar-10
12635.05
7890.53
each month was Apr-10 7101.47
tabulated May-10 7406.08
Jun-10 7718

8. Calculation (Stock Price Index)
Date Stock Price Index
• The monthly stock 9-Jul
9-Aug
1160
1109
price information was 9-Sep 1063
collected from 9-Oct 1053
9-Nov 1022
relevant source 9-Dec 1014
• Then its average stock 10-Jan 996
10-Feb 994
price per month was 10-Mar 920
calculated 10-Apr 847
10-May 962
10-Jun 965

9. Calculation (Covariance, Variance and
Beta)
• The Market index and Stock price index were
inserted in the preset formula in MS Excel
• Excel helped to tabulate the Covariance, Variance
and Beta
• The covariance of the given data was 0.004468318
• The Variance of the tabulated data set was
0.049745347
• The Beta calculated from the given data set
0.089824

10. Calculation (Covariance, Variance and
Beta)
Market ln(Market Market Stock ln(Stock Stock
Year Month index index) returns price price) returns
2009 July 8715.8 9.072892749 -4.71% 1160 7.056175284 -4.50%
2009 August 8314.76 9.025787528 -5.02% 1109 7.011213987 -4.24%
2009 September 7907.95 8.975623862 -2.81% 1063 6.968850378 -0.95%
2009 October 7689.16 8.947566824 -0.45% 1053 6.959398512 -2.99%
2009 November 7654.89 8.943099938 -3.23% 1022 6.929516771 -0.79%
2009 December 7411.35 8.910767888 -1.69% 1014 6.921658184 -1.79%
2010 January 7286.97 8.893843101 55.04% 996 6.903747258 -0.20%
2010 February 12635.05 9.444229977 -47.08% 994 6.901737207 -7.74%
2010 March 7890.53 8.973418585 -10.54% 920 6.82437367 -8.27%
2010 April 7101.47 8.868057084 4.20% 847 6.741700695 12.73%
2010 May 7406.08 8.910056563 4.13% 962 6.869014451 0.31%
2010 June 7718 8.951310542 4.13% 965 6.872128101 0.31%

11. Calculation (Expected Rate of Return)
• To calculate the Expected rate of return, the
risk free rates of T-bills was retrieved
• Averages were calculated for the relevant
months
• Used Rf+ß(Rm-Rf) to calculate expected
return
• ß and Rm pre calculated and used in the
formula

12. Calculation (Expected Rate of Return)
Date Rf Rm Rm-Rf ß(Rm-Rf) Rf+ß(Rm-Rf)
Jul-09 5.14 -4.71 -0.09853 -0.00885 4.25754845
Aug-09 2.05 -5.02 -0.07068 -0.00635 1.41269715
Sep-09 2.38 -2.81 -0.05193 -0.00466 1.91610965
Oct-09 3.35 -0.45 -0.03796 -0.00341 3.00504328
Nov-09 5.57 -3.23 -0.08795 -0.0079 4.7750331
Dec-09 7.21 -1.69 -0.08896 -0.00799 6.40696128
Jan-10 9.07 55.04 0.4597 0.04129 13.1990254
Feb-10 8.66 -47.08 -0.55738 -0.05006 3.65115775
Mar-10 6.68 -10.54 -0.1722 -0.01547 5.1332996
Apr-10 8.13 4.20 -0.03934 -0.00353 7.78064812
May-10 6.81 4.13 -0.02683 -0.00241 6.571762641
Jun-10 7.37 4.13 -0.03236 -0.00291 7.075105833

13. Findings
Market returns
60.00%
40.00%
20.00%
0.00%
1 2 3 Market returns
-20.00% 4 5 6 7 Market returns
8 9
-40.00% 10 11 12
-60.00%

14. Findings
Stock returns
15.00%
10.00%
5.00%
0.00%
Stock returns
1 2
-5.00% 3 4 5 6 Stock returns
7 8 9 10 11 12
-10.00%

15. Findings
Stock Price Index
1200
1000
800
600
400
200
0 Stock Price Index

16. Findings
• Beta was 0.08982, so the level of risk was quite
low.
• The return from investment is higher than the
return that we expected so variance is positive
(i.e. 0.049745347).
• It means the investment portfolio is positive

17. Findings
• For some months, both stock and market index
are negative like in July 2009 – March 2010
• From April 2010 to June 2010 both are positive.
• Covariance is also positive (i.e. 0.004468318).
• Risk free securities are taken for 91 days and we
have taken for the year July 2009 to June 2010.

18. Findings
Expected Return
15
10
5
0
Rf+ß(Rm-Rf)

19. Conclusion
• Stocks with a high beta should have a higher
return than the market
• The CAPM shows that the expected return of a
security or a portfolio should equal the rate on a
risk-free security plus a risk premium
• If this expected return does not meet or exceed
the required return, the investment should not
be undertaken

20. Conclusion
• Chilime hydropower project is one of the most
profitable investments in Nepal
• Chilime can offer good dividend and cash
returns to the investors
• The Company’s net profit has crossed NRs.843
million in the last fiscal year
• Because of its profitability it has a relatively high
share price
• It is a good time to own a share of Chilime
Hydropower Project

21. Conclusion