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%β = 1rm​ = 5%β = ?re​ = 4.2%

Investors require a return of 4.2% on a share. The risk-free rate is 1% and the expected market return is 5%. Use CAPM to find the beta β of the share.

re = 4.2%rf = 1%rm = 5%
β =
2.Easy
βr (%)SMLrf​ = 3%β = 1rm​ = 7%β = 1.2re​ = ?

The risk-free rate is 3%, the expected market return is 7% and a share has a beta of 1.2. Use CAPM to find the required return on the share re.

rf = 3%rm = 7%β = 1.2
re = %
3.Medium
WACC = 6.43%equity€8 000 000re​ = ?debt€3 000 000rd​ = 3%T = 25%

A company has equity worth €8 000 000 and debt worth €3 000 000. Its WACC is 6.43%, its pre-tax cost of debt is 3% and the tax rate is 25%. Find the cost of equity re.

E = €8 000 000D = €3 000 000WACC = 6.43%rd = 3%T = 25%
re = %
4.Medium
βr (%)SMLrf​ = 1%β = 1rm​ = ?β = 0.6re​ = 4.3%

A share with a beta of 0.6 has a required return of 4.3%. The risk-free rate is 1%. What expected market return rm does CAPM imply?

β = 0.6re = 4.3%rf = 1%
rm = %
5.Hard
rf​ = 4%, rm​ − rf​ = 7%D/E = 0.4equityβL​ = 0.9debtD/E = 1.25equityre​ = ?debtT = 25%

A company's shares have a beta of 0.9 at its current debt-to-equity ratio of 0.4. It plans to raise its debt-to-equity ratio to 1.25. The tax rate is 25%, the risk-free rate 4% and the market risk premium 7%. Find the cost of equity re after the change.

βL = 0.9D/E1 = 0.4D/E2 = 1.25T = 25%rf = 4%rm − rf = 7%
re = %
6.Hard
WACC = ?equity1 000 000 × €16.50β = 0.8rf​ = 1.5%, rm​ = 6.5%debt10 000 × €960rd​ = 3.5%T = 25.8%

A company has 1 000 000 shares at €16.50 each and 10 000 bonds trading at €960 each. The pre-tax cost of debt is 3.5% and the tax rate is 25.8%. The share’s beta is 0.8, the risk-free rate 1.5% and the market return 6.5%. Find the WACC.

β = 0.8rf = 1.5%rm = 6.5%rd = 3.5%T = 25.8%
WACC = %

Answer key

  1. 1. β = 0.8
  2. 2. re = 7.8 %
  3. 3. re = 7.997 %
  4. 4. rm = 6.5 %
  5. 5. re = 13.39 %
  6. 6. WACC = 4.432 %

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