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
βr (%)SMLrf​ = 2.5%β = 1rm​ = 7.5%β = 1.5re​ = ?

The risk-free rate is 2.5%, the expected market return is 7.5% and a share has a beta of 1.5. Use CAPM to find the required return on the share re.

rf = 2.5%rm = 7.5%β = 1.5
re = %
2.Easy
years0123…9Pp​ = €67€3.00€3.00€3.00…rp​ = ?

A company's preferred shares pay a fixed dividend of €3.00 per year and trade at €67. The tax rate is 28%. Find the cost of preferred stock rp.

Dp = €3.00Pp = €67T = 28%
rp = %
3.Medium
WACC = ?equity€4 000 000re​ = 14%debt€4 000 000rd​ = 4%T = 25%

A company has equity worth €4 000 000 and debt worth €4 000 000. Its cost of equity is 14%, its pre-tax cost of debt is 4% and the tax rate is 25%. Find the WACC.

E = €4 000 000D = €4 000 000re = 14%rd = 4%T = 25%
WACC = %
4.Medium
WACC = 7.03%equity€5 000 000re​ = ?debt€2 000 000rd​ = 3%T = 30%

A company has equity worth €5 000 000 and debt worth €2 000 000. Its WACC is 7.03%, its pre-tax cost of debt is 3% and the tax rate is 30%. Find the cost of equity re.

E = €5 000 000D = €2 000 000WACC = 7.03%rd = 3%T = 30%
re = %
5.Hard
WACC = ?equity€10 000 000re​ = 12%bonds2 000 × €871coupon 4%, n = 12T = 25.8%

A company has equity with a market value of €10 000 000 and a cost of equity of 12%. Its debt consists of 2 000 bonds (face value €1 000, annual coupon 4%, 12 years to maturity) that trade at €871 each. The tax rate is 25.8%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €10 000 000re = 12%bonds: 2 000 × €871coupon = 4%n = 12T = 25.8%
WACC = %
6.Hard
WACC = ?equity4 000 000 × €30.00β = 0.6rf​ = 4%, rm​ = 8%debt5 000 × €980rd​ = 3%T = 25%

A company has 4 000 000 shares at €30.00 each and 5 000 bonds trading at €980 each. The pre-tax cost of debt is 3% and the tax rate is 25%. The share’s beta is 0.6, the risk-free rate 4% and the market return 8%. Find the WACC.

β = 0.6rf = 4%rm = 8%rd = 3%T = 25%
WACC = %

Answer key

  1. 1. re = 10 %
  2. 2. rp = 4.478 %
  3. 3. WACC = 8.5 %
  4. 4. re = 9.002 %
  5. 5. WACC = 10.82 %
  6. 6. WACC = 6.237 %

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