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
years0123…9P0​ = €24.50D1​D2​D3​…D0​ = €1.90, g = 3%, re​ = ?

A company has just paid a dividend of €1.90 per share. Dividends are expected to grow by 3% per year forever, and the share price is €24.50. Use the dividend growth model to find the cost of equity re.

D0 = €1.90g = 3%P0 = €24.50
re = %
2.Easy
βr (%)SMLrf​ = 4%β = 1rm​ = 8%β = ?re​ = 11.2%

Investors require a return of 11.2% on a share. The risk-free rate is 4% and the expected market return is 8%. Use CAPM to find the beta β of the share.

re = 11.2%rf = 4%rm = 8%
β =
3.Medium
WACC = ?ordinary shares€8 000 000re​ = 14%preferred shares€2 000 000rp​ = 8%debt€4 000 000rd​ = 6%T = 28%

A company is financed with ordinary shares worth €8 000 000, preferred shares worth €2 000 000 and debt worth €4 000 000. The cost of equity is 14%, the cost of preferred stock 8% and the pre-tax cost of debt 6%. The tax rate is 28%. Find the WACC.

E = €8 000 000Ps = €2 000 000D = €4 000 000re = 14%rp = 8%rd = 6%T = 28%
WACC = %
4.Medium
WACC = 7.83%equity€4 000 000re​ = ?debt€3 000 000rd​ = 4.5%T = 20%

A company has equity worth €4 000 000 and debt worth €3 000 000. Its WACC is 7.83%, its pre-tax cost of debt is 4.5% and the tax rate is 20%. Find the cost of equity re.

E = €4 000 000D = €3 000 000WACC = 7.83%rd = 4.5%T = 20%
re = %
5.Hard
WACC = ?equity€6 000 000re​ = 10%bonds8 000 × €983coupon 7%, n = 4T = 30%

A company has equity with a market value of €6 000 000 and a cost of equity of 10%. Its debt consists of 8 000 bonds (face value €1 000, annual coupon 7%, 4 years to maturity) that trade at €983 each. The tax rate is 30%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €6 000 000re = 10%bonds: 8 000 × €983coupon = 7%n = 4T = 30%
WACC = %
6.Hard
WACC = ?equity2 500 000 × €27.00β = 0.8rf​ = 2.5%, rm​ = 6.5%debt20 000 × €980rd​ = 4%T = 21%

A company has 2 500 000 shares at €27.00 each and 20 000 bonds trading at €980 each. The pre-tax cost of debt is 4% and the tax rate is 21%. The share’s beta is 0.8, the risk-free rate 2.5% and the market return 6.5%. Find the WACC.

β = 0.8rf = 2.5%rm = 6.5%rd = 4%T = 21%
WACC = %

Answer key

  1. 1. re = 10.99 %
  2. 2. β = 1.8
  3. 3. WACC = 10.38 %
  4. 4. re = 11 %
  5. 5. WACC = 7.309 %
  6. 6. WACC = 5.128 %

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