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​ = €108.50D1​D2​D3​…D0​ = €3.10, g = 5%, re​ = ?

A company has just paid a dividend of €3.10 per share. Dividends are expected to grow by 5% per year forever, and the share price is €108.50. Use the dividend growth model to find the cost of equity re.

D0 = €3.10g = 5%P0 = €108.50
re = %
2.Easy
years0123…9Pp​ = €39€5.00€5.00€5.00…rp​ = ?

A company's preferred shares pay a fixed dividend of €5.00 per year and trade at €39. The tax rate is 20%. Find the cost of preferred stock rp.

Dp = €5.00Pp = €39T = 20%
rp = %
3.Medium
WACC = ?equity€10 000 000re​ = 10%debt€6 000 000rd​ = 7%T = 25%

A company has equity worth €10 000 000 and debt worth €6 000 000. Its cost of equity is 10%, its pre-tax cost of debt is 7% and the tax rate is 25%. Find the WACC.

E = €10 000 000D = €6 000 000re = 10%rd = 7%T = 25%
WACC = %
4.Medium
WACC = ?equity€3 000 000re​ = 9%debt€2 000 000rd​ = 4%T = 25.8%

A company has equity worth €3 000 000 and debt worth €2 000 000. Its cost of equity is 9%, its pre-tax cost of debt is 4% and the tax rate is 25.8%. Find the WACC.

E = €3 000 000D = €2 000 000re = 9%rd = 4%T = 25.8%
WACC = %
5.Hard
WACC = ?equity1 000 000 × €8.50β = 1.2rf​ = 1.5%, rm​ = 5.5%debt5 000 × €1 000rd​ = 7%T = 25.8%

A company has 1 000 000 shares at €8.50 each and 5 000 bonds trading at €1 000 each. The pre-tax cost of debt is 7% and the tax rate is 25.8%. The share’s beta is 1.2, the risk-free rate 1.5% and the market return 5.5%. Find the WACC.

β = 1.2rf = 1.5%rm = 5.5%rd = 7%T = 25.8%
WACC = %
6.Hard
rf​ = 2%, rm​ − rf​ = 5%D/E = 0.2equityβL​ = 1.2debtD/E = 0.75equityre​ = ?debtT = 28%

A company's shares have a beta of 1.2 at its current debt-to-equity ratio of 0.2. It plans to raise its debt-to-equity ratio to 0.75. The tax rate is 28%, the risk-free rate 2% and the market risk premium 5%. Find the cost of equity re after the change.

βL = 1.2D/E1 = 0.2D/E2 = 0.75T = 28%rf = 2%rm − rf = 5%
re = %

Answer key

  1. 1. re = 8 %
  2. 2. rp = 12.82 %
  3. 3. WACC = 8.219 %
  4. 4. WACC = 6.587 %
  5. 5. WACC = 5.89 %
  6. 6. re = 10.08 %

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