CAPM & WACC worksheet with answers

Free printable CAPM & WACC worksheet: 6 problems from easy to exam level, with an answer key. Print it or save it as a PDF.

New worksheetPractise online with hints

For teachers: free to print, copy and use in class. Every new worksheet has new values and its own answer key. A link to ExamProblems on your course page is appreciated.

Name: ____________________   Date: ____________

1.Easy
βr (%)SMLrf​ = 3%β = 1rm​ = 9.5%β = 1.1re​ = ?

The risk-free rate is 3%, the expected market return is 9.5% and a share has a beta of 1.1. Use CAPM to find the required return on the share re.

rf = 3%rm = 9.5%β = 1.1
re = %
2.Easy
βr (%)SMLrf​ = 3.5%β = 1rm​ = 8%β = 0.6re​ = ?

The risk-free rate is 3.5%, the expected market return is 8% and a share has a beta of 0.6. Use CAPM to find the required return on the share re.

rf = 3.5%rm = 8%β = 0.6
re = %
3.Medium
WACC = ?equity€5 000 000re​ = 13%debt€4 000 000rd​ = 3%T = 21%

A company has equity worth €5 000 000 and debt worth €4 000 000. Its cost of equity is 13%, its pre-tax cost of debt is 3% and the tax rate is 21%. Find the WACC.

E = €5 000 000D = €4 000 000re = 13%rd = 3%T = 21%
WACC = %
4.Medium
WACC = ?equity€12 000 000re​ = 14%debt€2 000 000rd​ = 3.5%T = 25%

A company has equity worth €12 000 000 and debt worth €2 000 000. Its cost of equity is 14%, its pre-tax cost of debt is 3.5% and the tax rate is 25%. Find the WACC.

E = €12 000 000D = €2 000 000re = 14%rd = 3.5%T = 25%
WACC = %
5.Hard
WACC = ?equity€8 000 000re​ = 9%bonds4 000 × €1 032coupon 6%, n = 8T = 21%

A company has equity with a market value of €8 000 000 and a cost of equity of 9%. Its debt consists of 4 000 bonds (face value €1 000, annual coupon 6%, 8 years to maturity) that trade at €1 032 each. The tax rate is 21%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €8 000 000re = 9%bonds: 4 000 × €1 032coupon = 6%n = 8T = 21%
WACC = %
6.Hard
rf​ = 3.5%, rm​ − rf​ = 6%D/E = 0.25equityβL​ = 1.5debtD/E = 0.75equityre​ = ?debtT = 25%

A company's shares have a beta of 1.5 at its current debt-to-equity ratio of 0.25. It plans to raise its debt-to-equity ratio to 0.75. The tax rate is 25%, the risk-free rate 3.5% and the market risk premium 6%. Find the cost of equity re after the change.

βL = 1.5D/E1 = 0.25D/E2 = 0.75T = 25%rf = 3.5%rm − rf = 6%
re = %

Answer key

  1. 1. re = 10.15 %
  2. 2. re = 6.2 %
  3. 3. WACC = 8.276 %
  4. 4. WACC = 12.38 %
  5. 5. WACC = 7.414 %
  6. 6. re = 15.34 %

Full step-by-step solutions: practise this topic on examproblems.com.