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€8 000 000I = €360 000tax savingT = 25.8%interest after tax?rd​·(1 − T) = ?

A company has loans of €8 000 000 on which it pays €360 000 interest per year. The tax rate is 25.8%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €8 000 000I = €360 000T = 25.8%
rd·(1 − T) = %
2.Easy
βr (%)SMLrf​ = 2.5%β = 1rm​ = 6.5%β = 0.6re​ = ?

The risk-free rate is 2.5%, the expected market return is 6.5% and a share has a beta of 0.6. Use CAPM to find the required return on the share re.

rf = 2.5%rm = 6.5%β = 0.6
re = %
3.Medium
WACC = ?equity€10 000 000re​ = 12%debt€6 000 000rd​ = 4%T = 25%

A company has equity worth €10 000 000 and debt worth €6 000 000. Its cost of equity is 12%, its pre-tax cost of debt is 4% and the tax rate is 25%. Find the WACC.

E = €10 000 000D = €6 000 000re = 12%rd = 4%T = 25%
WACC = %
4.Medium
WACC = ?equityEre​ = 10%debtD = 0.25·Erd​ = 3%T = 28%

A company has a debt-to-equity ratio (at market values) of 0.25. Its cost of equity is 10%, its pre-tax cost of debt is 3% and the tax rate is 28%. Find the WACC.

D/E = 0.25re = 10%rd = 3%T = 28%
WACC = %
5.Hard
WACC = ?equity€12 000 000re​ = 13%bonds2 000 × €967coupon 6%, n = 9T = 25.8%

A company has equity with a market value of €12 000 000 and a cost of equity of 13%. Its debt consists of 2 000 bonds (face value €1 000, annual coupon 6%, 9 years to maturity) that trade at €967 each. The tax rate is 25.8%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €12 000 000re = 13%bonds: 2 000 × €967coupon = 6%n = 9T = 25.8%
WACC = %
6.Hard
rf​ = 2.5%, rm​ − rf​ = 4%no debtequityβU​ = 1.2D/E = 0.4equityre​ = ?debtT = 21%

A company's business has an unlevered (asset) beta of 1.2. It plans a debt-to-equity ratio of 0.4. The tax rate is 21%, the risk-free rate is 2.5% and the market risk premium is 4%. Find the cost of equity re at the new capital structure.

βU = 1.2D/E = 0.4T = 21%rf = 2.5%rm − rf = 4%
re = %

Answer key

  1. 1. rd·(1 − T) = 3.339 %
  2. 2. re = 4.9 %
  3. 3. WACC = 8.625 %
  4. 4. WACC = 8.432 %
  5. 5. WACC = 11.86 %
  6. 6. re = 8.817 %

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