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​ = €70.00D1​D2​D3​…D0​ = €3.30, g = 6%, re​ = ?

A company has just paid a dividend of €3.30 per share. Dividends are expected to grow by 6% per year forever, and the share price is €70.00. Use the dividend growth model to find the cost of equity re.

D0 = €3.30g = 6%P0 = €70.00
re = %
2.Easy
βr (%)SMLrf​ = 2.5%β = 1rm​ = 8.5%β = ?re​ = 10%

Investors require a return of 10% on a share. The risk-free rate is 2.5% and the expected market return is 8.5%. Use CAPM to find the beta β of the share.

re = 10%rf = 2.5%rm = 8.5%
β =
3.Medium
WACC = ?equity€12 000 000re​ = 10%debt€6 000 000rd​ = 4%T = 28%

A company has equity worth €12 000 000 and debt worth €6 000 000. Its cost of equity is 10%, its pre-tax cost of debt is 4% and the tax rate is 28%. Find the WACC.

E = €12 000 000D = €6 000 000re = 10%rd = 4%T = 28%
WACC = %
4.Medium
WACC = ?equity€5 000 000re​ = 12%debt€5 000 000rd​ = 6%T = 20%

A company has equity worth €5 000 000 and debt worth €5 000 000. Its cost of equity is 12%, its pre-tax cost of debt is 6% and the tax rate is 20%. Find the WACC.

E = €5 000 000D = €5 000 000re = 12%rd = 6%T = 20%
WACC = %
5.Hard
WACC = ?equity2 000 000 × €43.00β = 1.1rf​ = 1.5%, rm​ = 7.5%debt40 000 × €1 000rd​ = 6%T = 25%

A company has 2 000 000 shares at €43.00 each and 40 000 bonds trading at €1 000 each. The pre-tax cost of debt is 6% and the tax rate is 25%. The share’s beta is 1.1, the risk-free rate 1.5% and the market return 7.5%. Find the WACC.

β = 1.1rf = 1.5%rm = 7.5%rd = 6%T = 25%
WACC = %
6.Hard
rf​ = 1.5%, rm​ − rf​ = 5%D/E = 0.2equityβL​ = 1.5debtD/E = 0.75equityre​ = ?debtT = 25.8%

A company's shares have a beta of 1.5 at its current debt-to-equity ratio of 0.2. It plans to raise its debt-to-equity ratio to 0.75. The tax rate is 25.8%, the risk-free rate 1.5% and the market risk premium 5%. Find the cost of equity re after the change.

βL = 1.5D/E1 = 0.2D/E2 = 0.75T = 25.8%rf = 1.5%rm − rf = 5%
re = %

Answer key

  1. 1. re = 11 %
  2. 2. β = 1.25
  3. 3. WACC = 7.627 %
  4. 4. WACC = 8.4 %
  5. 5. WACC = 6.957 %
  6. 6. re = 11.67 %

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