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​ = 4%β = 1rm​ = 10%β = 1.5re​ = ?

The risk-free rate is 4%, the expected market return is 10% and a share has a beta of 1.5. Use CAPM to find the required return on the share re.

rf = 4%rm = 10%β = 1.5
re = %
2.Easy
years0123…9Pp​ = €72€2.50€2.50€2.50…rp​ = ?

A company's preferred shares pay a fixed dividend of €2.50 per year and trade at €72. The tax rate is 20%. Find the cost of preferred stock rp.

Dp = €2.50Pp = €72T = 20%
rp = %
3.Medium
WACC = 11.97%equity€8 000 000re​ = ?debt€1 000 000rd​ = 5%T = 25%

A company has equity worth €8 000 000 and debt worth €1 000 000. Its WACC is 11.97%, its pre-tax cost of debt is 5% and the tax rate is 25%. Find the cost of equity re.

E = €8 000 000D = €1 000 000WACC = 11.97%rd = 5%T = 25%
re = %
4.Medium
WACC = ?equity€10 000 000re​ = 13%debt€3 000 000rd​ = 3.5%T = 20%

A company has equity worth €10 000 000 and debt worth €3 000 000. Its cost of equity is 13%, its pre-tax cost of debt is 3.5% and the tax rate is 20%. Find the WACC.

E = €10 000 000D = €3 000 000re = 13%rd = 3.5%T = 20%
WACC = %
5.Hard
WACC = ?equity5 000 000 × €18.50D0​ = €2.10g = 3%debt€92 500 000rd​ = 5%T = 20%

A company has 5 000 000 shares trading at €18.50; the book value of its equity is €37 000 000. It just paid a dividend of €2.10 per share, and dividends grow by 3% per year. Its debt has a market value of €92 500 000 and a pre-tax cost of 5%. The tax rate is 20%. Find the WACC, using the dividend growth model for the cost of equity.

N = 5 000 000P0 = €18.50book equity = €37 000 000D0 = €2.10g = 3%D = €92 500 000rd = 5%T = 20%
WACC = %
6.Hard
rf​ = 1%, rm​ − rf​ = 6%no debtequityβU​ = 0.7D/E = 0.25equityre​ = ?debtT = 20%

A company's business has an unlevered (asset) beta of 0.7. It plans a debt-to-equity ratio of 0.25. The tax rate is 20%, the risk-free rate is 1% and the market risk premium is 6%. Find the cost of equity re at the new capital structure.

βU = 0.7D/E = 0.25T = 20%rf = 1%rm − rf = 6%
re = %

Answer key

  1. 1. re = 13 %
  2. 2. rp = 3.472 %
  3. 3. re = 13 %
  4. 4. WACC = 10.65 %
  5. 5. WACC = 9.346 %
  6. 6. re = 6.04 %

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