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​ = 2%β = 1rm​ = 6.5%β = 1.3re​ = ?

The risk-free rate is 2%, the expected market return is 6.5% and a share has a beta of 1.3. Use CAPM to find the required return on the share re.

rf = 2%rm = 6.5%β = 1.3
re = %
2.Easy
Dloans€20 000 000I = €700 000tax savingT = 25%interest after tax?rd​·(1 − T) = ?

A company has loans of €20 000 000 on which it pays €700 000 interest per year. The tax rate is 25%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €20 000 000I = €700 000T = 25%
rd·(1 − T) = %
3.Medium
WACC = ?equityEre​ = 11%debtD = 1·Erd​ = 6%T = 30%

A company has a debt-to-equity ratio (at market values) of 1. Its cost of equity is 11%, its pre-tax cost of debt is 6% and the tax rate is 30%. Find the WACC.

D/E = 1re = 11%rd = 6%T = 30%
WACC = %
4.Medium
βr (%)SMLrf​ = 2%β = 1rm​ = ?β = 0.6re​ = 5%

A share with a beta of 0.6 has a required return of 5%. The risk-free rate is 2%. What expected market return rm does CAPM imply?

β = 0.6re = 5%rf = 2%
rm = %
5.Hard
WACC = ?equity5 000 000 × €27.50β = 0.6rf​ = 2.5%, rm​ = 7%debt40 000 × €1 020rd​ = 6%T = 25.8%

A company has 5 000 000 shares at €27.50 each and 40 000 bonds trading at €1 020 each. The pre-tax cost of debt is 6% and the tax rate is 25.8%. The share’s beta is 0.6, the risk-free rate 2.5% and the market return 7%. Find the WACC.

β = 0.6rf = 2.5%rm = 7%rd = 6%T = 25.8%
WACC = %
6.Hard
rf​ = 4%, rm​ − rf​ = 4.5%D/E = 0.4equityβL​ = 1.3debtD/E = 0.6equityre​ = ?debtT = 28%

A company's shares have a beta of 1.3 at its current debt-to-equity ratio of 0.4. It plans to raise its debt-to-equity ratio to 0.6. The tax rate is 28%, the risk-free rate 4% and the market risk premium 4.5%. Find the cost of equity re after the change.

βL = 1.3D/E1 = 0.4D/E2 = 0.6T = 28%rf = 4%rm − rf = 4.5%
re = %

Answer key

  1. 1. re = 7.85 %
  2. 2. rd·(1 − T) = 2.625 %
  3. 3. WACC = 7.6 %
  4. 4. rm = 7 %
  5. 5. WACC = 5.029 %
  6. 6. re = 10.5 %

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