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​ = €103.00D1​D2​D3​…D0​ = €3.00, g = 3%, re​ = ?

A company has just paid a dividend of €3.00 per share. Dividends are expected to grow by 3% per year forever, and the share price is €103.00. Use the dividend growth model to find the cost of equity re.

D0 = €3.00g = 3%P0 = €103.00
re = %
2.Easy
βr (%)SMLrf​ = 1%β = 1rm​ = 8%β = ?re​ = 9.4%

Investors require a return of 9.4% on a share. The risk-free rate is 1% and the expected market return is 8%. Use CAPM to find the beta β of the share.

re = 9.4%rf = 1%rm = 8%
β =
3.Medium
WACC = ?equityEre​ = 13%debtD = 1·Erd​ = 5%T = 28%

A company has a debt-to-equity ratio (at market values) of 1. Its cost of equity is 13%, its pre-tax cost of debt is 5% and the tax rate is 28%. Find the WACC.

D/E = 1re = 13%rd = 5%T = 28%
WACC = %
4.Medium
WACC = ?equityEre​ = 9%debtD = 0.25·Erd​ = 6%T = 28%

A company has a debt-to-equity ratio (at market values) of 0.25. Its cost of equity is 9%, its pre-tax cost of debt is 6% and the tax rate is 28%. Find the WACC.

D/E = 0.25re = 9%rd = 6%T = 28%
WACC = %
5.Hard
WACC = ?equity2 000 000 × €33.00D0​ = €1.80g = 4%debt€66 000 000rd​ = 4%T = 25%

A company has 2 000 000 shares trading at €33.00; the book value of its equity is €33 000 000. It just paid a dividend of €1.80 per share, and dividends grow by 4% per year. Its debt has a market value of €66 000 000 and a pre-tax cost of 4%. The tax rate is 25%. Find the WACC, using the dividend growth model for the cost of equity.

N = 2 000 000P0 = €33.00book equity = €33 000 000D0 = €1.80g = 4%D = €66 000 000rd = 4%T = 25%
WACC = %
6.Hard
WACC = ?equity€5 000 000re​ = 14%bonds4 000 × €973coupon 6%, n = 7T = 28%

A company has equity with a market value of €5 000 000 and a cost of equity of 14%. Its debt consists of 4 000 bonds (face value €1 000, annual coupon 6%, 7 years to maturity) that trade at €973 each. The tax rate is 28%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €5 000 000re = 14%bonds: 4 000 × €973coupon = 6%n = 7T = 28%
WACC = %

Answer key

  1. 1. re = 6 %
  2. 2. β = 1.2
  3. 3. WACC = 8.3 %
  4. 4. WACC = 8.064 %
  5. 5. WACC = 6.336 %
  6. 6. WACC = 9.918 %

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