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​ = 10%β = 1.2re​ = ?

The risk-free rate is 4%, the expected market return is 10% and a share has a beta of 1.2. Use CAPM to find the required return on the share re.

rf = 4%rm = 10%β = 1.2
re = %
2.Easy
years0123…9Pp​ = €81€5.00€5.00€5.00…rp​ = ?

A company's preferred shares pay a fixed dividend of €5.00 per year and trade at €81. The tax rate is 25%. Find the cost of preferred stock rp.

Dp = €5.00Pp = €81T = 25%
rp = %
3.Medium
WACC = ?equity€2 000 000re​ = 12%debt€2 000 000rd​ = 4%T = 25.8%

A company has equity worth €2 000 000 and debt worth €2 000 000. Its cost of equity is 12%, its pre-tax cost of debt is 4% and the tax rate is 25.8%. Find the WACC.

E = €2 000 000D = €2 000 000re = 12%rd = 4%T = 25.8%
WACC = %
4.Medium
WACC = ?equityEre​ = 10%debtD = 0.25·Erd​ = 5%T = 21%

A company has a debt-to-equity ratio (at market values) of 0.25. Its cost of equity is 10%, its pre-tax cost of debt is 5% and the tax rate is 21%. Find the WACC.

D/E = 0.25re = 10%rd = 5%T = 21%
WACC = %
5.Hard
WACC = ?equity5 000 000 × €11.50β = 1.5rf​ = 1%, rm​ = 5%debt20 000 × €980rd​ = 3%T = 20%

A company has 5 000 000 shares at €11.50 each and 20 000 bonds trading at €980 each. The pre-tax cost of debt is 3% and the tax rate is 20%. The share’s beta is 1.5, the risk-free rate 1% and the market return 5%. Find the WACC.

β = 1.5rf = 1%rm = 5%rd = 3%T = 20%
WACC = %
6.Hard
WACC = ?equity1 000 000 × €18.00D0​ = €0.80g = 2%debt€5 400 000rd​ = 4.5%T = 20%

A company has 1 000 000 shares trading at €18.00; the book value of its equity is €5 400 000. It just paid a dividend of €0.80 per share, and dividends grow by 2% per year. Its debt has a market value of €5 400 000 and a pre-tax cost of 4.5%. The tax rate is 20%. Find the WACC, using the dividend growth model for the cost of equity.

N = 1 000 000P0 = €18.00book equity = €5 400 000D0 = €0.80g = 2%D = €5 400 000rd = 4.5%T = 20%
WACC = %

Answer key

  1. 1. re = 11.2 %
  2. 2. rp = 6.173 %
  3. 3. WACC = 7.484 %
  4. 4. WACC = 8.79 %
  5. 5. WACC = 5.831 %
  6. 6. WACC = 5.856 %

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