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​ = 3.5%β = 1rm​ = 9%β = ?re​ = 8.45%

Investors require a return of 8.45% on a share. The risk-free rate is 3.5% and the expected market return is 9%. Use CAPM to find the beta β of the share.

re = 8.45%rf = 3.5%rm = 9%
β =
2.Easy
years0123…9Pp​ = €95€7.00€7.00€7.00…rp​ = ?

A company's preferred shares pay a fixed dividend of €7.00 per year and trade at €95. The tax rate is 21%. Find the cost of preferred stock rp.

Dp = €7.00Pp = €95T = 21%
rp = %
3.Medium
WACC = ?equity€10 000 000re​ = 14%debt€3 000 000rd​ = 5%T = 25%

A company has equity worth €10 000 000 and debt worth €3 000 000. Its cost of equity is 14%, its pre-tax cost of debt is 5% and the tax rate is 25%. Find the WACC.

E = €10 000 000D = €3 000 000re = 14%rd = 5%T = 25%
WACC = %
4.Medium
WACC = ?ordinary shares€8 000 000re​ = 13%preferred shares€1 000 000rp​ = 6%debt€6 000 000rd​ = 4.5%T = 30%

A company is financed with ordinary shares worth €8 000 000, preferred shares worth €1 000 000 and debt worth €6 000 000. The cost of equity is 13%, the cost of preferred stock 6% and the pre-tax cost of debt 4.5%. The tax rate is 30%. Find the WACC.

E = €8 000 000Ps = €1 000 000D = €6 000 000re = 13%rp = 6%rd = 4.5%T = 30%
WACC = %
5.Hard
rf​ = 1%, rm​ − rf​ = 7%no debtequityβU​ = 0.7D/E = 0.25equityre​ = ?debtT = 25.8%

A company's business has an unlevered (asset) beta of 0.7. It plans a debt-to-equity ratio of 0.25. The tax rate is 25.8%, the risk-free rate is 1% and the market risk premium is 7%. Find the cost of equity re at the new capital structure.

βU = 0.7D/E = 0.25T = 25.8%rf = 1%rm − rf = 7%
re = %
6.Hard
WACC = ?equity€8 000 000re​ = 13%bonds5 000 × €1 038coupon 7%, n = 11T = 25.8%

A company has equity with a market value of €8 000 000 and a cost of equity of 13%. Its debt consists of 5 000 bonds (face value €1 000, annual coupon 7%, 11 years to maturity) that trade at €1 038 each. The tax rate is 25.8%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €8 000 000re = 13%bonds: 5 000 × €1 038coupon = 7%n = 11T = 25.8%
WACC = %

Answer key

  1. 1. β = 0.9
  2. 2. rp = 7.368 %
  3. 3. WACC = 11.63 %
  4. 4. WACC = 8.593 %
  5. 5. re = 6.809 %
  6. 6. WACC = 9.784 %

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