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.

New worksheetPractise online with hints

For teachers: free to print, copy and use in class. Every new worksheet has new values and its own answer key. A link to ExamProblems on your course page is appreciated.

Name: ____________________   Date: ____________

1.Easy
years0123…9P0​ = €12.00D1​D2​D3​…D0​ = €0.80, g = 3%, re​ = ?

A company has just paid a dividend of €0.80 per share. Dividends are expected to grow by 3% per year forever, and the share price is €12.00. Use the dividend growth model to find the cost of equity re.

D0 = €0.80g = 3%P0 = €12.00
re = %
2.Easy
years0123…9P0​ = €48.50D1​D2​D3​…D0​ = €1.40, g = 4%, re​ = ?

A company has just paid a dividend of €1.40 per share. Dividends are expected to grow by 4% per year forever, and the share price is €48.50. Use the dividend growth model to find the cost of equity re.

D0 = €1.40g = 4%P0 = €48.50
re = %
3.Medium
WACC = ?equityEre​ = 11%debtD = 0.5·Erd​ = 4%T = 20%

A company has a debt-to-equity ratio (at market values) of 0.5. Its cost of equity is 11%, its pre-tax cost of debt is 4% and the tax rate is 20%. Find the WACC.

D/E = 0.5re = 11%rd = 4%T = 20%
WACC = %
4.Medium
WACC = ?equity€12 000 000re​ = 14%debt€3 000 000rd​ = 3%T = 28%

A company has equity worth €12 000 000 and debt worth €3 000 000. Its cost of equity is 14%, its pre-tax cost of debt is 3% and the tax rate is 28%. Find the WACC.

E = €12 000 000D = €3 000 000re = 14%rd = 3%T = 28%
WACC = %
5.Hard
WACC = ?equity2 000 000 × €11.00β = 1.8rf​ = 3.5%, rm​ = 9%debt10 000 × €1 000rd​ = 5%T = 21%

A company has 2 000 000 shares at €11.00 each and 10 000 bonds trading at €1 000 each. The pre-tax cost of debt is 5% and the tax rate is 21%. The share’s beta is 1.8, the risk-free rate 3.5% and the market return 9%. Find the WACC.

β = 1.8rf = 3.5%rm = 9%rd = 5%T = 21%
WACC = %
6.Hard
rf​ = 2%, rm​ − rf​ = 4.5%no debtequityβU​ = 0.8D/E = 0.75equityre​ = ?debtT = 20%

A company's business has an unlevered (asset) beta of 0.8. It plans a debt-to-equity ratio of 0.75. The tax rate is 20%, the risk-free rate is 2% and the market risk premium is 4.5%. Find the cost of equity re at the new capital structure.

βU = 0.8D/E = 0.75T = 20%rf = 2%rm − rf = 4.5%
re = %

Answer key

  1. 1. re = 9.867 %
  2. 2. re = 7.002 %
  3. 3. WACC = 8.4 %
  4. 4. WACC = 11.63 %
  5. 5. WACC = 10.45 %
  6. 6. re = 7.76 %

Full step-by-step solutions: practise this topic on examproblems.com.