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
βr (%)SMLrf​ = 1.5%β = 1rm​ = 8.5%β = 1.3re​ = ?

The risk-free rate is 1.5%, the expected market return is 8.5% and a share has a beta of 1.3. Use CAPM to find the required return on the share re.

rf = 1.5%rm = 8.5%β = 1.3
re = %
2.Easy
years0123…9P0​ = €30.50D1​D2​D3​…D0​ = €2.40, g = 2%, re​ = ?

A company has just paid a dividend of €2.40 per share. Dividends are expected to grow by 2% per year forever, and the share price is €30.50. Use the dividend growth model to find the cost of equity re.

D0 = €2.40g = 2%P0 = €30.50
re = %
3.Medium
WACC = ?ordinary shares€5 000 000re​ = 13%preferred shares€2 000 000rp​ = 7%debt€2 000 000rd​ = 5%T = 25%

A company is financed with ordinary shares worth €5 000 000, preferred shares worth €2 000 000 and debt worth €2 000 000. The cost of equity is 13%, the cost of preferred stock 7% and the pre-tax cost of debt 5%. The tax rate is 25%. Find the WACC.

E = €5 000 000Ps = €2 000 000D = €2 000 000re = 13%rp = 7%rd = 5%T = 25%
WACC = %
4.Medium
βr (%)SMLrf​ = 3.5%β = 1rm​ = ?β = 1.25re​ = 8.5%

A share with a beta of 1.25 has a required return of 8.5%. The risk-free rate is 3.5%. What expected market return rm does CAPM imply?

β = 1.25re = 8.5%rf = 3.5%
rm = %
5.Hard
WACC = ?equity2 000 000 × €39.50β = 0.9rf​ = 3%, rm​ = 9.5%debt40 000 × €1 050rd​ = 3.5%T = 21%

A company has 2 000 000 shares at €39.50 each and 40 000 bonds trading at €1 050 each. The pre-tax cost of debt is 3.5% and the tax rate is 21%. The share’s beta is 0.9, the risk-free rate 3% and the market return 9.5%. Find the WACC.

β = 0.9rf = 3%rm = 9.5%rd = 3.5%T = 21%
WACC = %
6.Hard
WACC = ?equity2 000 000 × €24.50D0​ = €0.50g = 5%debt€39 200 000rd​ = 4.5%T = 30%

A company has 2 000 000 shares trading at €24.50; the book value of its equity is €29 400 000. It just paid a dividend of €0.50 per share, and dividends grow by 5% per year. Its debt has a market value of €39 200 000 and a pre-tax cost of 4.5%. The tax rate is 30%. Find the WACC, using the dividend growth model for the cost of equity.

N = 2 000 000P0 = €24.50book equity = €29 400 000D0 = €0.50g = 5%D = €39 200 000rd = 4.5%T = 30%
WACC = %

Answer key

  1. 1. re = 10.6 %
  2. 2. re = 10.03 %
  3. 3. WACC = 9.611 %
  4. 4. rm = 7.5 %
  5. 5. WACC = 6.738 %
  6. 6. WACC = 5.368 %

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