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​ = 9%β = 0.6re​ = ?

The risk-free rate is 2.5%, the expected market return is 9% and a share has a beta of 0.6. Use CAPM to find the required return on the share re.

rf = 2.5%rm = 9%β = 0.6
re = %
2.Easy
βr (%)SMLrf​ = 2.5%β = 1rm​ = 6.5%β = ?re​ = 6.9%

Investors require a return of 6.9% 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 = 6.9%rf = 2.5%rm = 6.5%
β =
3.Medium
WACC = ?equity€2 000 000re​ = 12%debt€6 000 000rd​ = 3.5%T = 21%

A company has equity worth €2 000 000 and debt worth €6 000 000. Its cost of equity is 12%, its pre-tax cost of debt is 3.5% and the tax rate is 21%. Find the WACC.

E = €2 000 000D = €6 000 000re = 12%rd = 3.5%T = 21%
WACC = %
4.Medium
WACC = ?equity€2 000 000re​ = 12%debt€5 000 000rd​ = 3%T = 25.8%

A company has equity worth €2 000 000 and debt worth €5 000 000. Its cost of equity is 12%, its pre-tax cost of debt is 3% and the tax rate is 25.8%. Find the WACC.

E = €2 000 000D = €5 000 000re = 12%rd = 3%T = 25.8%
WACC = %
5.Hard
rf​ = 2%, rm​ − rf​ = 5%D/E = 0.25equityβL​ = 1.2debtD/E = 1.25equityre​ = ?debtT = 28%

A company's shares have a beta of 1.2 at its current debt-to-equity ratio of 0.25. It plans to raise its debt-to-equity ratio to 1.25. The tax rate is 28%, the risk-free rate 2% and the market risk premium 5%. Find the cost of equity re after the change.

βL = 1.2D/E1 = 0.25D/E2 = 1.25T = 28%rf = 2%rm − rf = 5%
re = %
6.Hard
rf​ = 3%, rm​ − rf​ = 4.5%no debtequityβU​ = 0.7D/E = 0.75equityre​ = ?debtT = 25%

A company's business has an unlevered (asset) beta of 0.7. It plans a debt-to-equity ratio of 0.75. The tax rate is 25%, the risk-free rate is 3% and the market risk premium is 4.5%. Find the cost of equity re at the new capital structure.

βU = 0.7D/E = 0.75T = 25%rf = 3%rm − rf = 4.5%
re = %

Answer key

  1. 1. re = 6.4 %
  2. 2. β = 1.1
  3. 3. WACC = 5.074 %
  4. 4. WACC = 5.019 %
  5. 5. re = 11.66 %
  6. 6. re = 7.922 %

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