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​ = 9.5%β = 1.1re​ = ?

The risk-free rate is 4%, the expected market return is 9.5% and a share has a beta of 1.1. Use CAPM to find the required return on the share re.

rf = 4%rm = 9.5%β = 1.1
re = %
2.Easy
βr (%)SMLrf​ = 2%β = 1rm​ = 7.5%β = ?re​ = 8.6%

Investors require a return of 8.6% on a share. The risk-free rate is 2% and the expected market return is 7.5%. Use CAPM to find the beta β of the share.

re = 8.6%rf = 2%rm = 7.5%
β =
3.Medium
WACC = ?equity€8 000 000re​ = 8%debt€1 000 000rd​ = 4%T = 20%

A company has equity worth €8 000 000 and debt worth €1 000 000. Its cost of equity is 8%, its pre-tax cost of debt is 4% and the tax rate is 20%. Find the WACC.

E = €8 000 000D = €1 000 000re = 8%rd = 4%T = 20%
WACC = %
4.Medium
WACC = ?equity€2 000 000re​ = 11%debt€5 000 000rd​ = 6%T = 25.8%

A company has equity worth €2 000 000 and debt worth €5 000 000. Its cost of equity is 11%, its pre-tax cost of debt is 6% and the tax rate is 25.8%. Find the WACC.

E = €2 000 000D = €5 000 000re = 11%rd = 6%T = 25.8%
WACC = %
5.Hard
WACC = ?equity2 500 000 × €14.00β = 1.2rf​ = 1%, rm​ = 6%debt10 000 × €1 020rd​ = 4.5%T = 25.8%

A company has 2 500 000 shares at €14.00 each and 10 000 bonds trading at €1 020 each. The pre-tax cost of debt is 4.5% and the tax rate is 25.8%. The share’s beta is 1.2, the risk-free rate 1% and the market return 6%. Find the WACC.

β = 1.2rf = 1%rm = 6%rd = 4.5%T = 25.8%
WACC = %
6.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 = %

Answer key

  1. 1. re = 10.05 %
  2. 2. β = 1.2
  3. 3. WACC = 7.467 %
  4. 4. WACC = 6.323 %
  5. 5. WACC = 6.174 %
  6. 6. re = 6.809 %

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