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​ = 8.5%β = 1.8re​ = ?

The risk-free rate is 1.5%, the expected market return is 8.5% and a share has a beta of 1.8. Use CAPM to find the required return on the share re.

rf = 1.5%rm = 8.5%β = 1.8
re = %
2.Easy
years0123…9P0​ = €51.00D1​D2​D3​…D0​ = €4.00, g = 2%, re​ = ?

A company has just paid a dividend of €4.00 per share. Dividends are expected to grow by 2% per year forever, and the share price is €51.00. Use the dividend growth model to find the cost of equity re.

D0 = €4.00g = 2%P0 = €51.00
re = %
3.Medium
βr (%)SMLrf​ = 2%β = 1rm​ = ?β = 2re​ = 15%

A share with a beta of 2 has a required return of 15%. The risk-free rate is 2%. What expected market return rm does CAPM imply?

β = 2re = 15%rf = 2%
rm = %
4.Medium
WACC = ?ordinary shares€4 000 000re​ = 9%preferred shares€500 000rp​ = 6.5%debt€4 000 000rd​ = 5%T = 25.8%

A company is financed with ordinary shares worth €4 000 000, preferred shares worth €500 000 and debt worth €4 000 000. The cost of equity is 9%, the cost of preferred stock 6.5% and the pre-tax cost of debt 5%. The tax rate is 25.8%. Find the WACC.

E = €4 000 000Ps = €500 000D = €4 000 000re = 9%rp = 6.5%rd = 5%T = 25.8%
WACC = %
5.Hard
rf​ = 2%, rm​ − rf​ = 4.5%no debtequityβU​ = 0.9D/E = 0.4equityre​ = ?debtT = 25%

A company's business has an unlevered (asset) beta of 0.9. It plans a debt-to-equity ratio of 0.4. The tax rate is 25%, the risk-free rate is 2% and the market risk premium is 4.5%. Find the cost of equity re at the new capital structure.

βU = 0.9D/E = 0.4T = 25%rf = 2%rm − rf = 4.5%
re = %
6.Hard
WACC = ?equity2 500 000 × €45.00β = 0.8rf​ = 3%, rm​ = 8.5%debt40 000 × €960rd​ = 3.5%T = 28%

A company has 2 500 000 shares at €45.00 each and 40 000 bonds trading at €960 each. The pre-tax cost of debt is 3.5% and the tax rate is 28%. The share’s beta is 0.8, the risk-free rate 3% and the market return 8.5%. Find the WACC.

β = 0.8rf = 3%rm = 8.5%rd = 3.5%T = 28%
WACC = %

Answer key

  1. 1. re = 14.1 %
  2. 2. re = 10 %
  3. 3. rm = 8.5 %
  4. 4. WACC = 6.364 %
  5. 5. re = 7.265 %
  6. 6. WACC = 6.158 %

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