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​ = 1.5%β = 1rm​ = 6.5%β = 0.8re​ = ?

The risk-free rate is 1.5%, the expected market return is 6.5% and a share has a beta of 0.8. Use CAPM to find the required return on the share re.

rf = 1.5%rm = 6.5%β = 0.8
re = %
2.Easy
βr (%)SMLrf​ = 2%β = 1rm​ = 6%β = 0.6re​ = ?

The risk-free rate is 2%, the expected market return is 6% and a share has a beta of 0.6. Use CAPM to find the required return on the share re.

rf = 2%rm = 6%β = 0.6
re = %
3.Medium
WACC = ?equity€4 000 000re​ = 14%debt€2 000 000rd​ = 4.5%T = 20%

A company has equity worth €4 000 000 and debt worth €2 000 000. Its cost of equity is 14%, its pre-tax cost of debt is 4.5% and the tax rate is 20%. Find the WACC.

E = €4 000 000D = €2 000 000re = 14%rd = 4.5%T = 20%
WACC = %
4.Medium
WACC = 7%equity€3 000 000re​ = ?debt€4 000 000rd​ = 5%T = 20%

A company has equity worth €3 000 000 and debt worth €4 000 000. Its WACC is 7%, its pre-tax cost of debt is 5% and the tax rate is 20%. Find the cost of equity re.

E = €3 000 000D = €4 000 000WACC = 7%rd = 5%T = 20%
re = %
5.Hard
rf​ = 4%, rm​ − rf​ = 5%D/E = 0.25equityβL​ = 0.9debtD/E = 1.5equityre​ = ?debtT = 28%

A company's shares have a beta of 0.9 at its current debt-to-equity ratio of 0.25. It plans to raise its debt-to-equity ratio to 1.5. The tax rate is 28%, the risk-free rate 4% and the market risk premium 5%. Find the cost of equity re after the change.

βL = 0.9D/E1 = 0.25D/E2 = 1.5T = 28%rf = 4%rm − rf = 5%
re = %
6.Hard
WACC = ?equity4 000 000 × €42.50β = 0.9rf​ = 1%, rm​ = 6.5%debt20 000 × €1 000rd​ = 5%T = 20%

A company has 4 000 000 shares at €42.50 each and 20 000 bonds trading at €1 000 each. The pre-tax cost of debt is 5% and the tax rate is 20%. The share’s beta is 0.9, the risk-free rate 1% and the market return 6.5%. Find the WACC.

β = 0.9rf = 1%rm = 6.5%rd = 5%T = 20%
WACC = %

Answer key

  1. 1. re = 5.5 %
  2. 2. re = 4.4 %
  3. 3. WACC = 10.53 %
  4. 4. re = 11 %
  5. 5. re = 11.93 %
  6. 6. WACC = 5.745 %

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