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
Dloans€4 000 000I = €200 000tax savingT = 21%interest after tax?rd​·(1 − T) = ?

A company has loans of €4 000 000 on which it pays €200 000 interest per year. The tax rate is 21%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €4 000 000I = €200 000T = 21%
rd·(1 − T) = %
2.Easy
Dloans€20 000 000I = €900 000tax savingT = 25.8%interest after tax?rd​·(1 − T) = ?

A company has loans of €20 000 000 on which it pays €900 000 interest per year. The tax rate is 25.8%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €20 000 000I = €900 000T = 25.8%
rd·(1 − T) = %
3.Medium
WACC = ?ordinary shares€5 000 000re​ = 10%preferred shares€1 000 000rp​ = 7.5%debt€4 000 000rd​ = 4%T = 25.8%

A company is financed with ordinary shares worth €5 000 000, preferred shares worth €1 000 000 and debt worth €4 000 000. The cost of equity is 10%, the cost of preferred stock 7.5% and the pre-tax cost of debt 4%. The tax rate is 25.8%. Find the WACC.

E = €5 000 000Ps = €1 000 000D = €4 000 000re = 10%rp = 7.5%rd = 4%T = 25.8%
WACC = %
4.Medium
βr (%)SMLrf​ = 2%β = 1rm​ = ?β = 1.5re​ = 8%

A share with a beta of 1.5 has a required return of 8%. The risk-free rate is 2%. What expected market return rm does CAPM imply?

β = 1.5re = 8%rf = 2%
rm = %
5.Hard
rf​ = 1%, rm​ − rf​ = 5%D/E = 0.25equityβL​ = 1.4debtD/E = 0.6equityre​ = ?debtT = 20%

A company's shares have a beta of 1.4 at its current debt-to-equity ratio of 0.25. It plans to raise its debt-to-equity ratio to 0.6. The tax rate is 20%, the risk-free rate 1% and the market risk premium 5%. Find the cost of equity re after the change.

βL = 1.4D/E1 = 0.25D/E2 = 0.6T = 20%rf = 1%rm − rf = 5%
re = %
6.Hard
WACC = ?equity5 000 000 × €23.50β = 1.8rf​ = 3%, rm​ = 7.5%debt10 000 × €980rd​ = 4.5%T = 28%

A company has 5 000 000 shares at €23.50 each and 10 000 bonds trading at €980 each. The pre-tax cost of debt is 4.5% and the tax rate is 28%. The share’s beta is 1.8, the risk-free rate 3% and the market return 7.5%. Find the WACC.

β = 1.8rf = 3%rm = 7.5%rd = 4.5%T = 28%
WACC = %

Answer key

  1. 1. rd·(1 − T) = 3.95 %
  2. 2. rd·(1 − T) = 3.339 %
  3. 3. WACC = 6.937 %
  4. 4. rm = 6 %
  5. 5. re = 9.633 %
  6. 6. WACC = 10.49 %

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