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​ = €43.50D1​D2​D3​…D0​ = €2.10, g = 4%, re​ = ?

A company has just paid a dividend of €2.10 per share. Dividends are expected to grow by 4% per year forever, and the share price is €43.50. Use the dividend growth model to find the cost of equity re.

D0 = €2.10g = 4%P0 = €43.50
re = %
2.Easy
βr (%)SMLrf​ = 2%β = 1rm​ = 6%β = 0.9re​ = ?

The risk-free rate is 2%, the expected market return is 6% and a share has a beta of 0.9. Use CAPM to find the required return on the share re.

rf = 2%rm = 6%β = 0.9
re = %
3.Medium
WACC = 9%equity€8 000 000re​ = ?debt€5 000 000rd​ = 6%T = 30%

A company has equity worth €8 000 000 and debt worth €5 000 000. Its WACC is 9%, its pre-tax cost of debt is 6% and the tax rate is 30%. Find the cost of equity re.

E = €8 000 000D = €5 000 000WACC = 9%rd = 6%T = 30%
re = %
4.Medium
WACC = ?equity€12 000 000re​ = 12%debt€4 000 000rd​ = 7%T = 20%

A company has equity worth €12 000 000 and debt worth €4 000 000. Its cost of equity is 12%, its pre-tax cost of debt is 7% and the tax rate is 20%. Find the WACC.

E = €12 000 000D = €4 000 000re = 12%rd = 7%T = 20%
WACC = %
5.Hard
rf​ = 4%, rm​ − rf​ = 6.5%D/E = 0.25equityβL​ = 1.4debtD/E = 0.75equityre​ = ?debtT = 25%

A company's shares have a beta of 1.4 at its current debt-to-equity ratio of 0.25. It plans to raise its debt-to-equity ratio to 0.75. The tax rate is 25%, the risk-free rate 4% and the market risk premium 6.5%. Find the cost of equity re after the change.

βL = 1.4D/E1 = 0.25D/E2 = 0.75T = 25%rf = 4%rm − rf = 6.5%
re = %
6.Hard
WACC = ?equity4 000 000 × €33.00β = 1.8rf​ = 1.5%, rm​ = 5.5%debt5 000 × €1 050rd​ = 5%T = 20%

A company has 4 000 000 shares at €33.00 each and 5 000 bonds trading at €1 050 each. The pre-tax cost of debt is 5% and the tax rate is 20%. The share’s beta is 1.8, the risk-free rate 1.5% and the market return 5.5%. Find the WACC.

β = 1.8rf = 1.5%rm = 5.5%rd = 5%T = 20%
WACC = %

Answer key

  1. 1. re = 9.021 %
  2. 2. re = 5.6 %
  3. 3. re = 12 %
  4. 4. WACC = 10.4 %
  5. 5. re = 15.97 %
  6. 6. WACC = 8.52 %

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