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 = 0.9re​ = ?

The risk-free rate is 1.5%, the expected market return is 8.5% and a share has a beta of 0.9. Use CAPM to find the required return on the share re.

rf = 1.5%rm = 8.5%β = 0.9
re = %
2.Easy
βr (%)SMLrf​ = 3%β = 1rm​ = 10%β = 1.1re​ = ?

The risk-free rate is 3%, the expected market return is 10% and a share has a beta of 1.1. Use CAPM to find the required return on the share re.

rf = 3%rm = 10%β = 1.1
re = %
3.Medium
WACC = 6.9%equity€6 000 000re​ = ?debt€2 000 000rd​ = 4.5%T = 20%

A company has equity worth €6 000 000 and debt worth €2 000 000. Its WACC is 6.9%, its pre-tax cost of debt is 4.5% and the tax rate is 20%. Find the cost of equity re.

E = €6 000 000D = €2 000 000WACC = 6.9%rd = 4.5%T = 20%
re = %
4.Medium
WACC = ?equity€8 000 000re​ = 14%debt€2 000 000rd​ = 4.5%T = 20%

A company has equity worth €8 000 000 and debt worth €2 000 000. Its cost of equity is 14%, its pre-tax cost of debt is 4.5% and the tax rate is 20%. Find the WACC.

E = €8 000 000D = €2 000 000re = 14%rd = 4.5%T = 20%
WACC = %
5.Hard
rf​ = 4%, rm​ − rf​ = 5.5%D/E = 0.2equityβL​ = 1.4debtD/E = 0.6equityre​ = ?debtT = 25.8%

A company's shares have a beta of 1.4 at its current debt-to-equity ratio of 0.2. It plans to raise its debt-to-equity ratio to 0.6. The tax rate is 25.8%, the risk-free rate 4% and the market risk premium 5.5%. Find the cost of equity re after the change.

βL = 1.4D/E1 = 0.2D/E2 = 0.6T = 25.8%rf = 4%rm − rf = 5.5%
re = %
6.Hard
rf​ = 2.5%, rm​ − rf​ = 4.5%D/E = 0.5equityβL​ = 1.5debtD/E = 0.6equityre​ = ?debtT = 28%

A company's shares have a beta of 1.5 at its current debt-to-equity ratio of 0.5. It plans to raise its debt-to-equity ratio to 0.6. The tax rate is 28%, the risk-free rate 2.5% and the market risk premium 4.5%. Find the cost of equity re after the change.

βL = 1.5D/E1 = 0.5D/E2 = 0.6T = 28%rf = 2.5%rm − rf = 4.5%
re = %

Answer key

  1. 1. re = 7.8 %
  2. 2. re = 10.7 %
  3. 3. re = 8 %
  4. 4. WACC = 11.92 %
  5. 5. re = 13.69 %
  6. 6. re = 9.607 %

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