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
Dloans€20 000 000I = €1 200 000tax savingT = 30%interest after tax?rd​·(1 − T) = ?

A company has loans of €20 000 000 on which it pays €1 200 000 interest per year. The tax rate is 30%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €20 000 000I = €1 200 000T = 30%
rd·(1 − T) = %
2.Easy
Dloans€12 000 000I = €600 000tax savingT = 30%interest after tax?rd​·(1 − T) = ?

A company has loans of €12 000 000 on which it pays €600 000 interest per year. The tax rate is 30%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €12 000 000I = €600 000T = 30%
rd·(1 − T) = %
3.Medium
βr (%)SMLrf​ = 2%β = 1rm​ = ?β = 2re​ = 13%

A share with a beta of 2 has a required return of 13%. The risk-free rate is 2%. What expected market return rm does CAPM imply?

β = 2re = 13%rf = 2%
rm = %
4.Medium
WACC = ?equity€12 000 000re​ = 9%debt€4 000 000rd​ = 4.5%T = 25%

A company has equity worth €12 000 000 and debt worth €4 000 000. Its cost of equity is 9%, its pre-tax cost of debt is 4.5% and the tax rate is 25%. Find the WACC.

E = €12 000 000D = €4 000 000re = 9%rd = 4.5%T = 25%
WACC = %
5.Hard
WACC = ?equity€12 000 000re​ = 12%bonds2 000 × €1 154coupon 4%, n = 12T = 20%

A company has equity with a market value of €12 000 000 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 €1 154 each. The tax rate is 20%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €12 000 000re = 12%bonds: 2 000 × €1 154coupon = 4%n = 12T = 20%
WACC = %
6.Hard
rf​ = 1%, rm​ − rf​ = 4.5%no debtequityβU​ = 1.2D/E = 0.75equityre​ = ?debtT = 20%

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 20%, the risk-free rate is 1% and the market risk premium is 4.5%. Find the cost of equity re at the new capital structure.

βU = 1.2D/E = 0.75T = 20%rf = 1%rm − rf = 4.5%
re = %

Answer key

  1. 1. rd·(1 − T) = 4.2 %
  2. 2. rd·(1 − T) = 3.5 %
  3. 3. rm = 7.5 %
  4. 4. WACC = 7.594 %
  5. 5. WACC = 10.39 %
  6. 6. re = 9.64 %

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