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​ = 7%β = 1.5re​ = ?

The risk-free rate is 2.5%, the expected market return is 7% and a share has a beta of 1.5. Use CAPM to find the required return on the share re.

rf = 2.5%rm = 7%β = 1.5
re = %
2.Easy
βr (%)SMLrf​ = 4%β = 1rm​ = 8%β = 0.8re​ = ?

The risk-free rate is 4%, the expected market return is 8% and a share has a beta of 0.8. Use CAPM to find the required return on the share re.

rf = 4%rm = 8%β = 0.8
re = %
3.Medium
βr (%)SMLrf​ = 1.5%β = 1rm​ = ?β = 1.25re​ = 7.75%

A share with a beta of 1.25 has a required return of 7.75%. The risk-free rate is 1.5%. What expected market return rm does CAPM imply?

β = 1.25re = 7.75%rf = 1.5%
rm = %
4.Medium
WACC = ?equity€10 000 000re​ = 14%debt€5 000 000rd​ = 6%T = 28%

A company has equity worth €10 000 000 and debt worth €5 000 000. Its cost of equity is 14%, its pre-tax cost of debt is 6% and the tax rate is 28%. Find the WACC.

E = €10 000 000D = €5 000 000re = 14%rd = 6%T = 28%
WACC = %
5.Hard
WACC = ?equity1 000 000 × €29.00D0​ = €1.20g = 2%debt€17 400 000rd​ = 6%T = 30%

A company has 1 000 000 shares trading at €29.00; the book value of its equity is €17 400 000. It just paid a dividend of €1.20 per share, and dividends grow by 2% per year. Its debt has a market value of €17 400 000 and a pre-tax cost of 6%. The tax rate is 30%. Find the WACC, using the dividend growth model for the cost of equity.

N = 1 000 000P0 = €29.00book equity = €17 400 000D0 = €1.20g = 2%D = €17 400 000rd = 6%T = 30%
WACC = %
6.Hard
WACC = ?equity5 000 000 × €23.50β = 1.3rf​ = 3.5%, rm​ = 8%debt20 000 × €1 050rd​ = 6%T = 30%

A company has 5 000 000 shares at €23.50 each and 20 000 bonds trading at €1 050 each. The pre-tax cost of debt is 6% and the tax rate is 30%. The share’s beta is 1.3, the risk-free rate 3.5% and the market return 8%. Find the WACC.

β = 1.3rf = 3.5%rm = 8%rd = 6%T = 30%
WACC = %

Answer key

  1. 1. re = 9.25 %
  2. 2. re = 7.2 %
  3. 3. rm = 6.5 %
  4. 4. WACC = 10.77 %
  5. 5. WACC = 5.463 %
  6. 6. WACC = 8.569 %

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