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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1.Easy
βr (%)SMLrf​ = 1.5%β = 1rm​ = 8%β = 1.3re​ = ?

The risk-free rate is 1.5%, the expected market return is 8% and a share has a beta of 1.3. Use CAPM to find the required return on the share re.

rf = 1.5%rm = 8%β = 1.3
re = %
2.Easy
βr (%)SMLrf​ = 1%β = 1rm​ = 6%β = 0.8re​ = ?

The risk-free rate is 1%, the expected market return is 6% and a share has a beta of 0.8. Use CAPM to find the required return on the share re.

rf = 1%rm = 6%β = 0.8
re = %
3.Medium
WACC = ?equity€6 000 000re​ = 8%debt€6 000 000rd​ = 4.5%T = 30%

A company has equity worth €6 000 000 and debt worth €6 000 000. Its cost of equity is 8%, its pre-tax cost of debt is 4.5% and the tax rate is 30%. Find the WACC.

E = €6 000 000D = €6 000 000re = 8%rd = 4.5%T = 30%
WACC = %
4.Medium
WACC = ?equity€8 000 000re​ = 12%debt€4 000 000rd​ = 4%T = 25%

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 4% and the tax rate is 25%. Find the WACC.

E = €8 000 000D = €4 000 000re = 12%rd = 4%T = 25%
WACC = %
5.Hard
WACC = ?equity€5 000 000re​ = 14%bonds2 000 × €938coupon 5%, n = 5T = 30%

A company has equity with a market value of €5 000 000 and a cost of equity of 14%. Its debt consists of 2 000 bonds (face value €1 000, annual coupon 5%, 5 years to maturity) that trade at €938 each. The tax rate is 30%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €5 000 000re = 14%bonds: 2 000 × €938coupon = 5%n = 5T = 30%
WACC = %
6.Hard
rf​ = 3.5%, rm​ − rf​ = 4.5%D/E = 0.5equityβL​ = 1.1debtD/E = 1.25equityre​ = ?debtT = 20%

A company's shares have a beta of 1.1 at its current debt-to-equity ratio of 0.5. It plans to raise its debt-to-equity ratio to 1.25. The tax rate is 20%, the risk-free rate 3.5% and the market risk premium 4.5%. Find the cost of equity re after the change.

βL = 1.1D/E1 = 0.5D/E2 = 1.25T = 20%rf = 3.5%rm − rf = 4.5%
re = %

Answer key

  1. 1. re = 9.95 %
  2. 2. re = 5 %
  3. 3. WACC = 5.575 %
  4. 4. WACC = 9 %
  5. 5. WACC = 11.42 %
  6. 6. re = 10.57 %

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