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​ = €43.50D1​D2​D3​…D0​ = €3.40, g = 2.5%, re​ = ?

A company has just paid a dividend of €3.40 per share. Dividends are expected to grow by 2.5% per year forever, and the share price is €43.50. Use the dividend growth model to find the cost of equity re.

D0 = €3.40g = 2.5%P0 = €43.50
re = %
2.Easy
βr (%)SMLrf​ = 3.5%β = 1rm​ = 9%β = 1.1re​ = ?

The risk-free rate is 3.5%, the expected market return is 9% and a share has a beta of 1.1. Use CAPM to find the required return on the share re.

rf = 3.5%rm = 9%β = 1.1
re = %
3.Medium
WACC = ?equityEre​ = 8%debtD = 1.5·Erd​ = 4.5%T = 21%

A company has a debt-to-equity ratio (at market values) of 1.5. Its cost of equity is 8%, its pre-tax cost of debt is 4.5% and the tax rate is 21%. Find the WACC.

D/E = 1.5re = 8%rd = 4.5%T = 21%
WACC = %
4.Medium
βr (%)SMLrf​ = 2%β = 1rm​ = ?β = 0.6re​ = 4.7%

A share with a beta of 0.6 has a required return of 4.7%. The risk-free rate is 2%. What expected market return rm does CAPM imply?

β = 0.6re = 4.7%rf = 2%
rm = %
5.Hard
WACC = ?equity4 000 000 × €9.00β = 1.1rf​ = 4%, rm​ = 8%debt40 000 × €980rd​ = 4%T = 25%

A company has 4 000 000 shares at €9.00 each and 40 000 bonds trading at €980 each. The pre-tax cost of debt is 4% and the tax rate is 25%. The share’s beta is 1.1, the risk-free rate 4% and the market return 8%. Find the WACC.

β = 1.1rf = 4%rm = 8%rd = 4%T = 25%
WACC = %
6.Hard
WACC = ?equity4 000 000 × €23.50D0​ = €1.20g = 4%debt€28 200 000rd​ = 5%T = 28%

A company has 4 000 000 shares trading at €23.50; the book value of its equity is €37 600 000. It just paid a dividend of €1.20 per share, and dividends grow by 4% per year. Its debt has a market value of €28 200 000 and a pre-tax cost of 5%. The tax rate is 28%. Find the WACC, using the dividend growth model for the cost of equity.

N = 4 000 000P0 = €23.50book equity = €37 600 000D0 = €1.20g = 4%D = €28 200 000rd = 5%T = 28%
WACC = %

Answer key

  1. 1. re = 10.51 %
  2. 2. re = 9.55 %
  3. 3. WACC = 5.333 %
  4. 4. rm = 6.5 %
  5. 5. WACC = 5.585 %
  6. 6. WACC = 7.993 %

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