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
Dloans€12 000 000I = €540 000tax savingT = 28%interest after tax?rd​·(1 − T) = ?

A company has loans of €12 000 000 on which it pays €540 000 interest per year. The tax rate is 28%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €12 000 000I = €540 000T = 28%
rd·(1 − T) = %
2.Easy
βr (%)SMLrf​ = 2.5%β = 1rm​ = 7%β = 0.6re​ = ?

The risk-free rate is 2.5%, the expected market return is 7% and a share has a beta of 0.6. Use CAPM to find the required return on the share re.

rf = 2.5%rm = 7%β = 0.6
re = %
3.Medium
WACC = ?equity€2 000 000re​ = 13%debt€5 000 000rd​ = 5%T = 28%

A company has equity worth €2 000 000 and debt worth €5 000 000. Its cost of equity is 13%, its pre-tax cost of debt is 5% and the tax rate is 28%. Find the WACC.

E = €2 000 000D = €5 000 000re = 13%rd = 5%T = 28%
WACC = %
4.Medium
WACC = 8.38%equity€4 000 000re​ = ?debt€4 000 000rd​ = 5%T = 25%

A company has equity worth €4 000 000 and debt worth €4 000 000. Its WACC is 8.38%, its pre-tax cost of debt is 5% and the tax rate is 25%. Find the cost of equity re.

E = €4 000 000D = €4 000 000WACC = 8.38%rd = 5%T = 25%
re = %
5.Hard
WACC = ?equity4 000 000 × €49.00β = 1.3rf​ = 3%, rm​ = 9.5%debt5 000 × €1 020rd​ = 6%T = 21%

A company has 4 000 000 shares at €49.00 each and 5 000 bonds trading at €1 020 each. The pre-tax cost of debt is 6% and the tax rate is 21%. The share’s beta is 1.3, the risk-free rate 3% and the market return 9.5%. Find the WACC.

β = 1.3rf = 3%rm = 9.5%rd = 6%T = 21%
WACC = %
6.Hard
rf​ = 3.5%, rm​ − rf​ = 6.5%D/E = 0.5equityβL​ = 1.2debtD/E = 1.25equityre​ = ?debtT = 30%

A company's shares have a beta of 1.2 at its current debt-to-equity ratio of 0.5. It plans to raise its debt-to-equity ratio to 1.25. The tax rate is 30%, the risk-free rate 3.5% and the market risk premium 6.5%. Find the cost of equity re after the change.

βL = 1.2D/E1 = 0.5D/E2 = 1.25T = 30%rf = 3.5%rm − rf = 6.5%
re = %

Answer key

  1. 1. rd·(1 − T) = 3.24 %
  2. 2. re = 5.2 %
  3. 3. WACC = 6.286 %
  4. 4. re = 13.01 %
  5. 5. WACC = 11.28 %
  6. 6. re = 14.33 %

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