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…9P0​ = €28.50D1​D2​D3​…D0​ = €1.60, g = 6%, re​ = ?

A company has just paid a dividend of €1.60 per share. Dividends are expected to grow by 6% per year forever, and the share price is €28.50. Use the dividend growth model to find the cost of equity re.

D0 = €1.60g = 6%P0 = €28.50
re = %
2.Easy
βr (%)SMLrf​ = 2.5%β = 1rm​ = 9.5%β = 1.2re​ = ?

The risk-free rate is 2.5%, the expected market return is 9.5% and a share has a beta of 1.2. Use CAPM to find the required return on the share re.

rf = 2.5%rm = 9.5%β = 1.2
re = %
3.Medium
βr (%)SMLrf​ = 1%β = 1rm​ = ?β = 1.6re​ = 9%

A share with a beta of 1.6 has a required return of 9%. The risk-free rate is 1%. What expected market return rm does CAPM imply?

β = 1.6re = 9%rf = 1%
rm = %
4.Medium
WACC = ?equity€4 000 000re​ = 14%debt€3 000 000rd​ = 4.5%T = 28%

A company has equity worth €4 000 000 and debt worth €3 000 000. Its cost of equity is 14%, its pre-tax cost of debt is 4.5% and the tax rate is 28%. Find the WACC.

E = €4 000 000D = €3 000 000re = 14%rd = 4.5%T = 28%
WACC = %
5.Hard
WACC = ?equity4 000 000 × €8.50β = 1.1rf​ = 2%, rm​ = 6.5%debt5 000 × €1 020rd​ = 7%T = 20%

A company has 4 000 000 shares at €8.50 each and 5 000 bonds trading at €1 020 each. The pre-tax cost of debt is 7% and the tax rate is 20%. The share’s beta is 1.1, the risk-free rate 2% and the market return 6.5%. Find the WACC.

β = 1.1rf = 2%rm = 6.5%rd = 7%T = 20%
WACC = %
6.Hard
WACC = ?equity2 500 000 × €22.00β = 1.8rf​ = 1%, rm​ = 8%debt5 000 × €1 050rd​ = 4.5%T = 25.8%

A company has 2 500 000 shares at €22.00 each and 5 000 bonds trading at €1 050 each. The pre-tax cost of debt is 4.5% and the tax rate is 25.8%. The share’s beta is 1.8, the risk-free rate 1% and the market return 8%. Find the WACC.

β = 1.8rf = 1%rm = 8%rd = 4.5%T = 25.8%
WACC = %

Answer key

  1. 1. re = 11.95 %
  2. 2. re = 10.9 %
  3. 3. rm = 6 %
  4. 4. WACC = 9.389 %
  5. 5. WACC = 6.774 %
  6. 6. WACC = 12.71 %

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