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​ = €106.00D1​D2​D3​…D0​ = €3.00, g = 6%, re​ = ?

A company has just paid a dividend of €3.00 per share. Dividends are expected to grow by 6% per year forever, and the share price is €106.00. Use the dividend growth model to find the cost of equity re.

D0 = €3.00g = 6%P0 = €106.00
re = %
2.Easy
βr (%)SMLrf​ = 3.5%β = 1rm​ = 8%β = 0.9re​ = ?

The risk-free rate is 3.5%, the expected market return is 8% and a share has a beta of 0.9. Use CAPM to find the required return on the share re.

rf = 3.5%rm = 8%β = 0.9
re = %
3.Medium
WACC = ?ordinary shares€5 000 000re​ = 10%preferred shares€1 500 000rp​ = 6.5%debt€3 000 000rd​ = 4%T = 30%

A company is financed with ordinary shares worth €5 000 000, preferred shares worth €1 500 000 and debt worth €3 000 000. The cost of equity is 10%, the cost of preferred stock 6.5% and the pre-tax cost of debt 4%. The tax rate is 30%. Find the WACC.

E = €5 000 000Ps = €1 500 000D = €3 000 000re = 10%rp = 6.5%rd = 4%T = 30%
WACC = %
4.Medium
WACC = ?equityEre​ = 13%debtD = 0.6·Erd​ = 3%T = 25.8%

A company has a debt-to-equity ratio (at market values) of 0.6. Its cost of equity is 13%, its pre-tax cost of debt is 3% and the tax rate is 25.8%. Find the WACC.

D/E = 0.6re = 13%rd = 3%T = 25.8%
WACC = %
5.Hard
WACC = ?equity4 000 000 × €38.00β = 1.3rf​ = 2%, rm​ = 7.5%debt20 000 × €1 000rd​ = 4%T = 21%

A company has 4 000 000 shares at €38.00 each and 20 000 bonds trading at €1 000 each. The pre-tax cost of debt is 4% and the tax rate is 21%. The share’s beta is 1.3, the risk-free rate 2% and the market return 7.5%. Find the WACC.

β = 1.3rf = 2%rm = 7.5%rd = 4%T = 21%
WACC = %
6.Hard
WACC = ?equity€15 000 000re​ = 12%bonds2 000 × €950coupon 6%, n = 4T = 21%

A company has equity with a market value of €15 000 000 and a cost of equity of 12%. Its debt consists of 2 000 bonds (face value €1 000, annual coupon 6%, 4 years to maturity) that trade at €950 each. The tax rate is 21%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €15 000 000re = 12%bonds: 2 000 × €950coupon = 6%n = 4T = 21%
WACC = %

Answer key

  1. 1. re = 9 %
  2. 2. re = 7.55 %
  3. 3. WACC = 7.174 %
  4. 4. WACC = 8.96 %
  5. 5. WACC = 8.453 %
  6. 6. WACC = 11.32 %

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