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…9P0​ = €44.50D1​D2​D3​…D0​ = €1.30, g = 3%, re​ = ?

A company has just paid a dividend of €1.30 per share. Dividends are expected to grow by 3% per year forever, and the share price is €44.50. Use the dividend growth model to find the cost of equity re.

D0 = €1.30g = 3%P0 = €44.50
re = %
2.Easy
years0123…9Pp​ = €40€3.00€3.00€3.00…rp​ = ?

A company's preferred shares pay a fixed dividend of €3.00 per year and trade at €40. The tax rate is 25.8%. Find the cost of preferred stock rp.

Dp = €3.00Pp = €40T = 25.8%
rp = %
3.Medium
WACC = ?equity€3 000 000re​ = 10%debt€4 000 000rd​ = 3.5%T = 21%

A company has equity worth €3 000 000 and debt worth €4 000 000. Its cost of equity is 10%, its pre-tax cost of debt is 3.5% and the tax rate is 21%. Find the WACC.

E = €3 000 000D = €4 000 000re = 10%rd = 3.5%T = 21%
WACC = %
4.Medium
WACC = ?ordinary shares€5 000 000re​ = 12%preferred shares€1 000 000rp​ = 7.5%debt€4 000 000rd​ = 3%T = 20%

A company is financed with ordinary shares worth €5 000 000, preferred shares worth €1 000 000 and debt worth €4 000 000. The cost of equity is 12%, the cost of preferred stock 7.5% and the pre-tax cost of debt 3%. The tax rate is 20%. Find the WACC.

E = €5 000 000Ps = €1 000 000D = €4 000 000re = 12%rp = 7.5%rd = 3%T = 20%
WACC = %
5.Hard
rf​ = 4%, rm​ − rf​ = 4%no debtequityβU​ = 0.9D/E = 0.25equityre​ = ?debtT = 25%

A company's business has an unlevered (asset) beta of 0.9. It plans a debt-to-equity ratio of 0.25. The tax rate is 25%, the risk-free rate is 4% and the market risk premium is 4%. Find the cost of equity re at the new capital structure.

βU = 0.9D/E = 0.25T = 25%rf = 4%rm − rf = 4%
re = %
6.Hard
WACC = ?equity5 000 000 × €8.00β = 1.2rf​ = 1%, rm​ = 5%debt10 000 × €1 000rd​ = 7%T = 20%

A company has 5 000 000 shares at €8.00 each and 10 000 bonds trading at €1 000 each. The pre-tax cost of debt is 7% and the tax rate is 20%. The share’s beta is 1.2, the risk-free rate 1% and the market return 5%. Find the WACC.

β = 1.2rf = 1%rm = 5%rd = 7%T = 20%
WACC = %

Answer key

  1. 1. re = 6.009 %
  2. 2. rp = 7.5 %
  3. 3. WACC = 5.866 %
  4. 4. WACC = 7.71 %
  5. 5. re = 8.275 %
  6. 6. WACC = 5.76 %

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