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…9Pp​ = €32€7.00€7.00€7.00…rp​ = ?

A company's preferred shares pay a fixed dividend of €7.00 per year and trade at €32. The tax rate is 28%. Find the cost of preferred stock rp.

Dp = €7.00Pp = €32T = 28%
rp = %
2.Easy
βr (%)SMLrf​ = 1%β = 1rm​ = 6%β = 0.8re​ = ?

The risk-free rate is 1%, the expected market return is 6% and a share has a beta of 0.8. Use CAPM to find the required return on the share re.

rf = 1%rm = 6%β = 0.8
re = %
3.Medium
WACC = ?equity€3 000 000re​ = 12%debt€2 000 000rd​ = 3.5%T = 20%

A company has equity worth €3 000 000 and debt worth €2 000 000. Its cost of equity is 12%, its pre-tax cost of debt is 3.5% and the tax rate is 20%. Find the WACC.

E = €3 000 000D = €2 000 000re = 12%rd = 3.5%T = 20%
WACC = %
4.Medium
WACC = ?equity€3 000 000re​ = 12%debt€5 000 000rd​ = 5%T = 30%

A company has equity worth €3 000 000 and debt worth €5 000 000. Its cost of equity is 12%, its pre-tax cost of debt is 5% and the tax rate is 30%. Find the WACC.

E = €3 000 000D = €5 000 000re = 12%rd = 5%T = 30%
WACC = %
5.Hard
WACC = ?equity€8 000 000re​ = 11%bonds5 000 × €1 074coupon 7%, n = 10T = 21%

A company has equity with a market value of €8 000 000 and a cost of equity of 11%. Its debt consists of 5 000 bonds (face value €1 000, annual coupon 7%, 10 years to maturity) that trade at €1 074 each. The tax rate is 21%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €8 000 000re = 11%bonds: 5 000 × €1 074coupon = 7%n = 10T = 21%
WACC = %
6.Hard
rf​ = 3%, rm​ − rf​ = 5%no debtequityβU​ = 0.8D/E = 1.5equityre​ = ?debtT = 25.8%

A company's business has an unlevered (asset) beta of 0.8. It plans a debt-to-equity ratio of 1.5. The tax rate is 25.8%, the risk-free rate is 3% and the market risk premium is 5%. Find the cost of equity re at the new capital structure.

βU = 0.8D/E = 1.5T = 25.8%rf = 3%rm − rf = 5%
re = %

Answer key

  1. 1. rp = 21.88 %
  2. 2. re = 5 %
  3. 3. WACC = 8.32 %
  4. 4. WACC = 6.688 %
  5. 5. WACC = 8.484 %
  6. 6. re = 11.45 %

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