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
βr (%)SMLrf​ = 2.5%β = 1rm​ = 6.5%β = ?re​ = 5.5%

Investors require a return of 5.5% on a share. The risk-free rate is 2.5% and the expected market return is 6.5%. Use CAPM to find the beta β of the share.

re = 5.5%rf = 2.5%rm = 6.5%
β =
2.Easy
βr (%)SMLrf​ = 3%β = 1rm​ = 10%β = 0.6re​ = ?

The risk-free rate is 3%, the expected market return is 10% and a share has a beta of 0.6. Use CAPM to find the required return on the share re.

rf = 3%rm = 10%β = 0.6
re = %
3.Medium
WACC = ?equity€10 000 000re​ = 12%debt€4 000 000rd​ = 7%T = 21%

A company has equity worth €10 000 000 and debt worth €4 000 000. Its cost of equity is 12%, its pre-tax cost of debt is 7% and the tax rate is 21%. Find the WACC.

E = €10 000 000D = €4 000 000re = 12%rd = 7%T = 21%
WACC = %
4.Medium
WACC = ?equity€8 000 000re​ = 14%debt€4 000 000rd​ = 3.5%T = 25%

A company has equity worth €8 000 000 and debt worth €4 000 000. Its cost of equity is 14%, its pre-tax cost of debt is 3.5% and the tax rate is 25%. Find the WACC.

E = €8 000 000D = €4 000 000re = 14%rd = 3.5%T = 25%
WACC = %
5.Hard
WACC = ?equity1 000 000 × €24.50β = 0.6rf​ = 3.5%, rm​ = 8.5%debt5 000 × €960rd​ = 3.5%T = 30%

A company has 1 000 000 shares at €24.50 each and 5 000 bonds trading at €960 each. The pre-tax cost of debt is 3.5% and the tax rate is 30%. The share’s beta is 0.6, the risk-free rate 3.5% and the market return 8.5%. Find the WACC.

β = 0.6rf = 3.5%rm = 8.5%rd = 3.5%T = 30%
WACC = %
6.Hard
rf​ = 1%, rm​ − rf​ = 5.5%D/E = 0.2equityβL​ = 1.5debtD/E = 1.5equityre​ = ?debtT = 30%

A company's shares have a beta of 1.5 at its current debt-to-equity ratio of 0.2. It plans to raise its debt-to-equity ratio to 1.5. The tax rate is 30%, the risk-free rate 1% and the market risk premium 5.5%. Find the cost of equity re after the change.

βL = 1.5D/E1 = 0.2D/E2 = 1.5T = 30%rf = 1%rm − rf = 5.5%
re = %

Answer key

  1. 1. β = 0.75
  2. 2. re = 7.2 %
  3. 3. WACC = 10.15 %
  4. 4. WACC = 10.21 %
  5. 5. WACC = 5.837 %
  6. 6. re = 15.84 %

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