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​ = 3.5%β = 1rm​ = 9.5%β = 1.1re​ = ?

The risk-free rate is 3.5%, the expected market return is 9.5% and a share has a beta of 1.1. Use CAPM to find the required return on the share re.

rf = 3.5%rm = 9.5%β = 1.1
re = %
2.Easy
Dloans€2 000 000I = €120 000tax savingT = 30%interest after tax?rd​·(1 − T) = ?

A company has loans of €2 000 000 on which it pays €120 000 interest per year. The tax rate is 30%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €2 000 000I = €120 000T = 30%
rd·(1 − T) = %
3.Medium
WACC = 8.96%equity€10 000 000re​ = ?debt€5 000 000rd​ = 4%T = 28%

A company has equity worth €10 000 000 and debt worth €5 000 000. Its WACC is 8.96%, its pre-tax cost of debt is 4% and the tax rate is 28%. Find the cost of equity re.

E = €10 000 000D = €5 000 000WACC = 8.96%rd = 4%T = 28%
re = %
4.Medium
WACC = 11.03%equity€6 000 000re​ = ?debt€2 000 000rd​ = 3%T = 30%

A company has equity worth €6 000 000 and debt worth €2 000 000. Its WACC is 11.03%, its pre-tax cost of debt is 3% and the tax rate is 30%. Find the cost of equity re.

E = €6 000 000D = €2 000 000WACC = 11.03%rd = 3%T = 30%
re = %
5.Hard
rf​ = 3.5%, rm​ − rf​ = 6.5%no debtequityβU​ = 1.2D/E = 0.75equityre​ = ?debtT = 25%

A company's business has an unlevered (asset) beta of 1.2. It plans a debt-to-equity ratio of 0.75. The tax rate is 25%, the risk-free rate is 3.5% and the market risk premium is 6.5%. Find the cost of equity re at the new capital structure.

βU = 1.2D/E = 0.75T = 25%rf = 3.5%rm − rf = 6.5%
re = %
6.Hard
rf​ = 2.5%, rm​ − rf​ = 6%D/E = 0.5equityβL​ = 1.4debtD/E = 1.25equityre​ = ?debtT = 25.8%

A company's shares have a beta of 1.4 at its current debt-to-equity ratio of 0.5. It plans to raise its debt-to-equity ratio to 1.25. The tax rate is 25.8%, the risk-free rate 2.5% and the market risk premium 6%. Find the cost of equity re after the change.

βL = 1.4D/E1 = 0.5D/E2 = 1.25T = 25.8%rf = 2.5%rm − rf = 6%
re = %

Answer key

  1. 1. re = 10.1 %
  2. 2. rd·(1 − T) = 4.2 %
  3. 3. re = 12 %
  4. 4. re = 14.01 %
  5. 5. re = 15.69 %
  6. 6. re = 14.31 %

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