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…9Pp​ = €93€3.00€3.00€3.00…rp​ = ?

A company's preferred shares pay a fixed dividend of €3.00 per year and trade at €93. The tax rate is 25.8%. Find the cost of preferred stock rp.

Dp = €3.00Pp = €93T = 25.8%
rp = %
2.Easy
βr (%)SMLrf​ = 1%β = 1rm​ = 5%β = 1.8re​ = ?

The risk-free rate is 1%, the expected market return is 5% and a share has a beta of 1.8. Use CAPM to find the required return on the share re.

rf = 1%rm = 5%β = 1.8
re = %
3.Medium
WACC = ?equityEre​ = 13%debtD = 0.4·Erd​ = 3.5%T = 30%

A company has a debt-to-equity ratio (at market values) of 0.4. Its cost of equity is 13%, its pre-tax cost of debt is 3.5% and the tax rate is 30%. Find the WACC.

D/E = 0.4re = 13%rd = 3.5%T = 30%
WACC = %
4.Medium
WACC = ?ordinary shares€4 000 000re​ = 12%preferred shares€1 500 000rp​ = 7%debt€3 000 000rd​ = 3%T = 21%

A company is financed with ordinary shares worth €4 000 000, preferred shares worth €1 500 000 and debt worth €3 000 000. The cost of equity is 12%, the cost of preferred stock 7% and the pre-tax cost of debt 3%. The tax rate is 21%. Find the WACC.

E = €4 000 000Ps = €1 500 000D = €3 000 000re = 12%rp = 7%rd = 3%T = 21%
WACC = %
5.Hard
WACC = ?equity2 500 000 × €22.00β = 0.8rf​ = 3.5%, rm​ = 10%debt5 000 × €960rd​ = 3.5%T = 20%

A company has 2 500 000 shares at €22.00 each and 5 000 bonds trading at €960 each. The pre-tax cost of debt is 3.5% and the tax rate is 20%. The share’s beta is 0.8, the risk-free rate 3.5% and the market return 10%. Find the WACC.

β = 0.8rf = 3.5%rm = 10%rd = 3.5%T = 20%
WACC = %
6.Hard
rf​ = 3.5%, rm​ − rf​ = 7%no debtequityβU​ = 0.8D/E = 1equityre​ = ?debtT = 21%

A company's business has an unlevered (asset) beta of 0.8. It plans a debt-to-equity ratio of 1. The tax rate is 21%, the risk-free rate is 3.5% and the market risk premium is 7%. Find the cost of equity re at the new capital structure.

βU = 0.8D/E = 1T = 21%rf = 3.5%rm − rf = 7%
re = %

Answer key

  1. 1. rp = 3.226 %
  2. 2. re = 8.2 %
  3. 3. WACC = 9.986 %
  4. 4. WACC = 7.719 %
  5. 5. WACC = 8.226 %
  6. 6. re = 13.52 %

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