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​ = 1.5%β = 1rm​ = 6%β = 1.5re​ = ?

The risk-free rate is 1.5%, the expected market return is 6% and a share has a beta of 1.5. Use CAPM to find the required return on the share re.

rf = 1.5%rm = 6%β = 1.5
re = %
2.Easy
years0123…9P0​ = €48.50D1​D2​D3​…D0​ = €1.40, g = 4%, re​ = ?

A company has just paid a dividend of €1.40 per share. Dividends are expected to grow by 4% per year forever, and the share price is €48.50. Use the dividend growth model to find the cost of equity re.

D0 = €1.40g = 4%P0 = €48.50
re = %
3.Medium
βr (%)SMLrf​ = 2%β = 1rm​ = ?β = 0.6re​ = 6.2%

A share with a beta of 0.6 has a required return of 6.2%. The risk-free rate is 2%. What expected market return rm does CAPM imply?

β = 0.6re = 6.2%rf = 2%
rm = %
4.Medium
βr (%)SMLrf​ = 1.5%β = 1rm​ = ?β = 1.2re​ = 7.5%

A share with a beta of 1.2 has a required return of 7.5%. The risk-free rate is 1.5%. What expected market return rm does CAPM imply?

β = 1.2re = 7.5%rf = 1.5%
rm = %
5.Hard
WACC = ?equity4 000 000 × €30.50β = 1.1rf​ = 2%, rm​ = 8.5%debt40 000 × €1 020rd​ = 3%T = 25.8%

A company has 4 000 000 shares at €30.50 each and 40 000 bonds trading at €1 020 each. The pre-tax cost of debt is 3% and the tax rate is 25.8%. The share’s beta is 1.1, the risk-free rate 2% and the market return 8.5%. Find the WACC.

β = 1.1rf = 2%rm = 8.5%rd = 3%T = 25.8%
WACC = %
6.Hard
rf​ = 2%, rm​ − rf​ = 7%D/E = 0.5equityβL​ = 1.1debtD/E = 1equityre​ = ?debtT = 30%

A company's shares have a beta of 1.1 at its current debt-to-equity ratio of 0.5. It plans to raise its debt-to-equity ratio to 1. The tax rate is 30%, the risk-free rate 2% and the market risk premium 7%. Find the cost of equity re after the change.

βL = 1.1D/E1 = 0.5D/E2 = 1T = 30%rf = 2%rm − rf = 7%
re = %

Answer key

  1. 1. re = 8.25 %
  2. 2. re = 7.002 %
  3. 3. rm = 9 %
  4. 4. rm = 6.5 %
  5. 5. WACC = 7.415 %
  6. 6. re = 11.7 %

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