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​ = 2%β = 1rm​ = 8%β = 1.8re​ = ?

The risk-free rate is 2%, the expected market return is 8% and a share has a beta of 1.8. Use CAPM to find the required return on the share re.

rf = 2%rm = 8%β = 1.8
re = %
2.Easy
βr (%)SMLrf​ = 3.5%β = 1rm​ = 9.5%β = ?re​ = 14.3%

Investors require a return of 14.3% on a share. The risk-free rate is 3.5% and the expected market return is 9.5%. Use CAPM to find the beta β of the share.

re = 14.3%rf = 3.5%rm = 9.5%
β =
3.Medium
WACC = ?equity€12 000 000re​ = 8%debt€4 000 000rd​ = 3.5%T = 28%

A company has equity worth €12 000 000 and debt worth €4 000 000. Its cost of equity is 8%, its pre-tax cost of debt is 3.5% and the tax rate is 28%. Find the WACC.

E = €12 000 000D = €4 000 000re = 8%rd = 3.5%T = 28%
WACC = %
4.Medium
βr (%)SMLrf​ = 1%β = 1rm​ = ?β = 0.9re​ = 7.3%

A share with a beta of 0.9 has a required return of 7.3%. The risk-free rate is 1%. What expected market return rm does CAPM imply?

β = 0.9re = 7.3%rf = 1%
rm = %
5.Hard
WACC = ?equity2 000 000 × €58.50β = 1.8rf​ = 1.5%, rm​ = 6.5%debt20 000 × €980rd​ = 7%T = 21%

A company has 2 000 000 shares at €58.50 each and 20 000 bonds trading at €980 each. The pre-tax cost of debt is 7% and the tax rate is 21%. The share’s beta is 1.8, the risk-free rate 1.5% and the market return 6.5%. Find the WACC.

β = 1.8rf = 1.5%rm = 6.5%rd = 7%T = 21%
WACC = %
6.Hard
rf​ = 2.5%, rm​ − rf​ = 4%D/E = 0.4equityβL​ = 1.5debtD/E = 1.25equityre​ = ?debtT = 25%

A company's shares have a beta of 1.5 at its current debt-to-equity ratio of 0.4. It plans to raise its debt-to-equity ratio to 1.25. The tax rate is 25%, the risk-free rate 2.5% and the market risk premium 4%. Find the cost of equity re after the change.

βL = 1.5D/E1 = 0.4D/E2 = 1.25T = 25%rf = 2.5%rm − rf = 4%
re = %

Answer key

  1. 1. re = 12.8 %
  2. 2. β = 1.8
  3. 3. WACC = 6.63 %
  4. 4. rm = 8 %
  5. 5. WACC = 9.787 %
  6. 6. re = 11.44 %

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