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​ = 4%β = 1rm​ = 11%β = 1.2re​ = ?

The risk-free rate is 4%, the expected market return is 11% and a share has a beta of 1.2. Use CAPM to find the required return on the share re.

rf = 4%rm = 11%β = 1.2
re = %
2.Easy
Dloans€20 000 000I = €1 000 000tax savingT = 30%interest after tax?rd​·(1 − T) = ?

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

D = €20 000 000I = €1 000 000T = 30%
rd·(1 − T) = %
3.Medium
WACC = ?ordinary shares€4 000 000re​ = 14%preferred shares€1 500 000rp​ = 8%debt€6 000 000rd​ = 3%T = 25%

A company is financed with ordinary shares worth €4 000 000, preferred shares worth €1 500 000 and debt worth €6 000 000. The cost of equity is 14%, the cost of preferred stock 8% and the pre-tax cost of debt 3%. The tax rate is 25%. Find the WACC.

E = €4 000 000Ps = €1 500 000D = €6 000 000re = 14%rp = 8%rd = 3%T = 25%
WACC = %
4.Medium
WACC = ?equity€4 000 000re​ = 13%debt€2 000 000rd​ = 4.5%T = 28%

A company has equity worth €4 000 000 and debt worth €2 000 000. Its cost of equity is 13%, its pre-tax cost of debt is 4.5% and the tax rate is 28%. Find the WACC.

E = €4 000 000D = €2 000 000re = 13%rd = 4.5%T = 28%
WACC = %
5.Hard
rf​ = 3.5%, rm​ − rf​ = 5%no debtequityβU​ = 1.1D/E = 0.6equityre​ = ?debtT = 28%

A company's business has an unlevered (asset) beta of 1.1. It plans a debt-to-equity ratio of 0.6. The tax rate is 28%, the risk-free rate is 3.5% and the market risk premium is 5%. Find the cost of equity re at the new capital structure.

βU = 1.1D/E = 0.6T = 28%rf = 3.5%rm − rf = 5%
re = %
6.Hard
WACC = ?equity€10 000 000re​ = 10%bonds8 000 × €1 121coupon 7%, n = 11T = 20%

A company has equity with a market value of €10 000 000 and a cost of equity of 10%. Its debt consists of 8 000 bonds (face value €1 000, annual coupon 7%, 11 years to maturity) that trade at €1 121 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 = €10 000 000re = 10%bonds: 8 000 × €1 121coupon = 7%n = 11T = 20%
WACC = %

Answer key

  1. 1. re = 12.4 %
  2. 2. rd·(1 − T) = 3.5 %
  3. 3. WACC = 7.087 %
  4. 4. WACC = 9.747 %
  5. 5. re = 11.38 %
  6. 6. WACC = 7.354 %

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