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​ = €31.00D1​D2​D3​…D0​ = €1.80, g = 3%, re​ = ?

A company has just paid a dividend of €1.80 per share. Dividends are expected to grow by 3% per year forever, and the share price is €31.00. Use the dividend growth model to find the cost of equity re.

D0 = €1.80g = 3%P0 = €31.00
re = %
2.Easy
Dloans€2 000 000I = €90 000tax savingT = 25.8%interest after tax?rd​·(1 − T) = ?

A company has loans of €2 000 000 on which it pays €90 000 interest per year. The tax rate is 25.8%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €2 000 000I = €90 000T = 25.8%
rd·(1 − T) = %
3.Medium
WACC = ?equityEre​ = 14%debtD = 0.4·Erd​ = 6%T = 25.8%

A company has a debt-to-equity ratio (at market values) of 0.4. Its cost of equity is 14%, its pre-tax cost of debt is 6% and the tax rate is 25.8%. Find the WACC.

D/E = 0.4re = 14%rd = 6%T = 25.8%
WACC = %
4.Medium
WACC = ?equityEre​ = 14%debtD = 0.4·Erd​ = 4.5%T = 28%

A company has a debt-to-equity ratio (at market values) of 0.4. Its cost of equity is 14%, its pre-tax cost of debt is 4.5% and the tax rate is 28%. Find the WACC.

D/E = 0.4re = 14%rd = 4.5%T = 28%
WACC = %
5.Hard
rf​ = 2.5%, rm​ − rf​ = 6%no debtequityβU​ = 0.8D/E = 1equityre​ = ?debtT = 20%

A company's business has an unlevered (asset) beta of 0.8. It plans a debt-to-equity ratio of 1. The tax rate is 20%, the risk-free rate is 2.5% and the market risk premium is 6%. Find the cost of equity re at the new capital structure.

βU = 0.8D/E = 1T = 20%rf = 2.5%rm − rf = 6%
re = %
6.Hard
WACC = ?equity€10 000 000re​ = 12%bonds5 000 × €948coupon 7%, n = 7T = 25.8%

A company has equity with a market value of €10 000 000 and a cost of equity of 12%. Its debt consists of 5 000 bonds (face value €1 000, annual coupon 7%, 7 years to maturity) that trade at €948 each. The tax rate is 25.8%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €10 000 000re = 12%bonds: 5 000 × €948coupon = 7%n = 7T = 25.8%
WACC = %

Answer key

  1. 1. re = 8.981 %
  2. 2. rd·(1 − T) = 3.339 %
  3. 3. WACC = 11.27 %
  4. 4. WACC = 10.93 %
  5. 5. re = 11.14 %
  6. 6. WACC = 10.05 %

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