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%β = 1rm​ = 7.5%β = ?re​ = 5.875%

Investors require a return of 5.875% on a share. The risk-free rate is 1% and the expected market return is 7.5%. Use CAPM to find the beta β of the share.

re = 5.875%rf = 1%rm = 7.5%
β =
2.Easy
Dloans€2 000 000I = €90 000tax savingT = 25.8%interest after tax?rd​·(1 − T) = ?

A company has loans of €2 000 000 on which it pays €90 000 interest per year. The tax rate is 25.8%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €2 000 000I = €90 000T = 25.8%
rd·(1 − T) = %
3.Medium
WACC = ?equityEre​ = 12%debtD = 1·Erd​ = 6%T = 28%

A company has a debt-to-equity ratio (at market values) of 1. Its cost of equity is 12%, its pre-tax cost of debt is 6% and the tax rate is 28%. Find the WACC.

D/E = 1re = 12%rd = 6%T = 28%
WACC = %
4.Medium
WACC = ?equityEre​ = 12%debtD = 1.5·Erd​ = 4.5%T = 25%

A company has a debt-to-equity ratio (at market values) of 1.5. Its cost of equity is 12%, its pre-tax cost of debt is 4.5% and the tax rate is 25%. Find the WACC.

D/E = 1.5re = 12%rd = 4.5%T = 25%
WACC = %
5.Hard
WACC = ?equity2 500 000 × €8.00β = 0.8rf​ = 1.5%, rm​ = 8.5%debt20 000 × €980rd​ = 7%T = 20%

A company has 2 500 000 shares at €8.00 each and 20 000 bonds trading at €980 each. The pre-tax cost of debt is 7% and the tax rate is 20%. The share’s beta is 0.8, the risk-free rate 1.5% and the market return 8.5%. Find the WACC.

β = 0.8rf = 1.5%rm = 8.5%rd = 7%T = 20%
WACC = %
6.Hard
rf​ = 4%, rm​ − rf​ = 4%no debtequityβU​ = 1D/E = 0.6equityre​ = ?debtT = 21%

A company's business has an unlevered (asset) beta of 1. It plans a debt-to-equity ratio of 0.6. The tax rate is 21%, the risk-free rate is 4% and the market risk premium is 4%. Find the cost of equity re at the new capital structure.

βU = 1D/E = 0.6T = 21%rf = 4%rm − rf = 4%
re = %

Answer key

  1. 1. β = 0.75
  2. 2. rd·(1 − T) = 3.339 %
  3. 3. WACC = 8.16 %
  4. 4. WACC = 6.825 %
  5. 5. WACC = 6.358 %
  6. 6. re = 9.896 %

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