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​ = €74€2.00€2.00€2.00…rp​ = ?

A company's preferred shares pay a fixed dividend of €2.00 per year and trade at €74. The tax rate is 30%. Find the cost of preferred stock rp.

Dp = €2.00Pp = €74T = 30%
rp = %
2.Easy
βr (%)SMLrf​ = 1.5%β = 1rm​ = 8%β = ?re​ = 6.7%

Investors require a return of 6.7% on a share. The risk-free rate is 1.5% and the expected market return is 8%. Use CAPM to find the beta β of the share.

re = 6.7%rf = 1.5%rm = 8%
β =
3.Medium
WACC = ?equity€4 000 000re​ = 11%debt€4 000 000rd​ = 6%T = 28%

A company has equity worth €4 000 000 and debt worth €4 000 000. Its cost of equity is 11%, its pre-tax cost of debt is 6% and the tax rate is 28%. Find the WACC.

E = €4 000 000D = €4 000 000re = 11%rd = 6%T = 28%
WACC = %
4.Medium
βr (%)SMLrf​ = 3%β = 1rm​ = ?β = 1.4re​ = 12.1%

A share with a beta of 1.4 has a required return of 12.1%. The risk-free rate is 3%. What expected market return rm does CAPM imply?

β = 1.4re = 12.1%rf = 3%
rm = %
5.Hard
WACC = ?equity€10 000 000re​ = 14%bonds8 000 × €967coupon 6%, n = 9T = 30%

A company has equity with a market value of €10 000 000 and a cost of equity of 14%. Its debt consists of 8 000 bonds (face value €1 000, annual coupon 6%, 9 years to maturity) that trade at €967 each. The tax rate is 30%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €10 000 000re = 14%bonds: 8 000 × €967coupon = 6%n = 9T = 30%
WACC = %
6.Hard
WACC = ?equity1 000 000 × €19.00β = 0.8rf​ = 3.5%, rm​ = 8%debt20 000 × €980rd​ = 5%T = 25%

A company has 1 000 000 shares at €19.00 each and 20 000 bonds trading at €980 each. The pre-tax cost of debt is 5% and the tax rate is 25%. The share’s beta is 0.8, the risk-free rate 3.5% and the market return 8%. Find the WACC.

β = 0.8rf = 3.5%rm = 8%rd = 5%T = 25%
WACC = %

Answer key

  1. 1. rp = 2.703 %
  2. 2. β = 0.8
  3. 3. WACC = 7.66 %
  4. 4. rm = 9.5 %
  5. 5. WACC = 9.877 %
  6. 6. WACC = 5.399 %

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