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.

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Name: ____________________   Date: ____________

1.Easy
years0123…9Pp​ = €40€3.50€3.50€3.50…rp​ = ?

A company's preferred shares pay a fixed dividend of €3.50 per year and trade at €40. The tax rate is 20%. Find the cost of preferred stock rp.

Dp = €3.50Pp = €40T = 20%
rp = %
2.Easy
βr (%)SMLrf​ = 1.5%β = 1rm​ = 8%β = 1.8re​ = ?

The risk-free rate is 1.5%, the expected market return is 8% and a share has a beta of 1.8. Use CAPM to find the required return on the share re.

rf = 1.5%rm = 8%β = 1.8
re = %
3.Medium
WACC = ?equity€8 000 000re​ = 12%debt€4 000 000rd​ = 5%T = 28%

A company has equity worth €8 000 000 and debt worth €4 000 000. Its cost of equity is 12%, its pre-tax cost of debt is 5% and the tax rate is 28%. Find the WACC.

E = €8 000 000D = €4 000 000re = 12%rd = 5%T = 28%
WACC = %
4.Medium
WACC = ?equity€3 000 000re​ = 8%debt€1 000 000rd​ = 4%T = 30%

A company has equity worth €3 000 000 and debt worth €1 000 000. Its cost of equity is 8%, its pre-tax cost of debt is 4% and the tax rate is 30%. Find the WACC.

E = €3 000 000D = €1 000 000re = 8%rd = 4%T = 30%
WACC = %
5.Hard
WACC = ?equity€10 000 000re​ = 9%bonds8 000 × €970coupon 6%, n = 8T = 28%

A company has equity with a market value of €10 000 000 and a cost of equity of 9%. Its debt consists of 8 000 bonds (face value €1 000, annual coupon 6%, 8 years to maturity) that trade at €970 each. The tax rate is 28%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €10 000 000re = 9%bonds: 8 000 × €970coupon = 6%n = 8T = 28%
WACC = %
6.Hard
WACC = ?equity5 000 000 × €44.00β = 0.8rf​ = 1.5%, rm​ = 7%debt20 000 × €1 050rd​ = 3%T = 28%

A company has 5 000 000 shares at €44.00 each and 20 000 bonds trading at €1 050 each. The pre-tax cost of debt is 3% and the tax rate is 28%. The share’s beta is 0.8, the risk-free rate 1.5% and the market return 7%. Find the WACC.

β = 0.8rf = 1.5%rm = 7%rd = 3%T = 28%
WACC = %

Answer key

  1. 1. rp = 8.75 %
  2. 2. re = 13.2 %
  3. 3. WACC = 9.2 %
  4. 4. WACC = 6.7 %
  5. 5. WACC = 7.11 %
  6. 6. WACC = 5.574 %

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