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
years0123…9Pp​ = €46€8.00€8.00€8.00…rp​ = ?

A company's preferred shares pay a fixed dividend of €8.00 per year and trade at €46. The tax rate is 25%. Find the cost of preferred stock rp.

Dp = €8.00Pp = €46T = 25%
rp = %
2.Easy
βr (%)SMLrf​ = 2.5%β = 1rm​ = 9%β = 1.5re​ = ?

The risk-free rate is 2.5%, the expected market return is 9% and a share has a beta of 1.5. Use CAPM to find the required return on the share re.

rf = 2.5%rm = 9%β = 1.5
re = %
3.Medium
WACC = ?equity€12 000 000re​ = 10%debt€5 000 000rd​ = 5%T = 20%

A company has equity worth €12 000 000 and debt worth €5 000 000. Its cost of equity is 10%, its pre-tax cost of debt is 5% and the tax rate is 20%. Find the WACC.

E = €12 000 000D = €5 000 000re = 10%rd = 5%T = 20%
WACC = %
4.Medium
WACC = ?ordinary shares€5 000 000re​ = 10%preferred shares€1 500 000rp​ = 6%debt€3 000 000rd​ = 5%T = 25.8%

A company is financed with ordinary shares worth €5 000 000, preferred shares worth €1 500 000 and debt worth €3 000 000. The cost of equity is 10%, the cost of preferred stock 6% and the pre-tax cost of debt 5%. The tax rate is 25.8%. Find the WACC.

E = €5 000 000Ps = €1 500 000D = €3 000 000re = 10%rp = 6%rd = 5%T = 25.8%
WACC = %
5.Hard
rf​ = 2%, rm​ − rf​ = 6%no debtequityβU​ = 0.6D/E = 0.5equityre​ = ?debtT = 21%

A company's business has an unlevered (asset) beta of 0.6. It plans a debt-to-equity ratio of 0.5. The tax rate is 21%, the risk-free rate is 2% and the market risk premium is 6%. Find the cost of equity re at the new capital structure.

βU = 0.6D/E = 0.5T = 21%rf = 2%rm − rf = 6%
re = %
6.Hard
WACC = ?equity4 000 000 × €15.50β = 1.3rf​ = 1%, rm​ = 6%debt5 000 × €1 020rd​ = 3.5%T = 20%

A company has 4 000 000 shares at €15.50 each and 5 000 bonds trading at €1 020 each. The pre-tax cost of debt is 3.5% and the tax rate is 20%. The share’s beta is 1.3, the risk-free rate 1% and the market return 6%. Find the WACC.

β = 1.3rf = 1%rm = 6%rd = 3.5%T = 20%
WACC = %

Answer key

  1. 1. rp = 17.39 %
  2. 2. re = 12.25 %
  3. 3. WACC = 8.235 %
  4. 4. WACC = 7.382 %
  5. 5. re = 7.022 %
  6. 6. WACC = 7.143 %

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