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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Name: ____________________   Date: ____________

1.Easy
βr (%)SMLrf​ = 3%β = 1rm​ = 9.5%β = ?re​ = 12.1%

Investors require a return of 12.1% on a share. The risk-free rate is 3% and the expected market return is 9.5%. Use CAPM to find the beta β of the share.

re = 12.1%rf = 3%rm = 9.5%
β =
2.Easy
years0123…9Pp​ = €98€7.50€7.50€7.50…rp​ = ?

A company's preferred shares pay a fixed dividend of €7.50 per year and trade at €98. The tax rate is 21%. Find the cost of preferred stock rp.

Dp = €7.50Pp = €98T = 21%
rp = %
3.Medium
WACC = 7.44%equity€4 000 000re​ = ?debt€2 000 000rd​ = 6%T = 28%

A company has equity worth €4 000 000 and debt worth €2 000 000. Its WACC is 7.44%, its pre-tax cost of debt is 6% and the tax rate is 28%. Find the cost of equity re.

E = €4 000 000D = €2 000 000WACC = 7.44%rd = 6%T = 28%
re = %
4.Medium
WACC = ?equityEre​ = 10%debtD = 1.5·Erd​ = 4%T = 25%

A company has a debt-to-equity ratio (at market values) of 1.5. Its cost of equity is 10%, its pre-tax cost of debt is 4% and the tax rate is 25%. Find the WACC.

D/E = 1.5re = 10%rd = 4%T = 25%
WACC = %
5.Hard
WACC = ?equity4 000 000 × €22.50D0​ = €1.80g = 2%debt€27 000 000rd​ = 6%T = 21%

A company has 4 000 000 shares trading at €22.50; the book value of its equity is €36 000 000. It just paid a dividend of €1.80 per share, and dividends grow by 2% per year. Its debt has a market value of €27 000 000 and a pre-tax cost of 6%. The tax rate is 21%. Find the WACC, using the dividend growth model for the cost of equity.

N = 4 000 000P0 = €22.50book equity = €36 000 000D0 = €1.80g = 2%D = €27 000 000rd = 6%T = 21%
WACC = %
6.Hard
WACC = ?equity€15 000 000re​ = 14%bonds5 000 × €1 135coupon 5%, n = 11T = 25%

A company has equity with a market value of €15 000 000 and a cost of equity of 14%. Its debt consists of 5 000 bonds (face value €1 000, annual coupon 5%, 11 years to maturity) that trade at €1 135 each. The tax rate is 25%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €15 000 000re = 14%bonds: 5 000 × €1 135coupon = 5%n = 11T = 25%
WACC = %

Answer key

  1. 1. β = 1.4
  2. 2. rp = 7.653 %
  3. 3. re = 9 %
  4. 4. WACC = 5.8 %
  5. 5. WACC = 8.909 %
  6. 6. WACC = 10.88 %

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