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​ = 1.5%β = 1rm​ = 7.5%β = 1.3re​ = ?

The risk-free rate is 1.5%, the expected market return is 7.5% and a share has a beta of 1.3. Use CAPM to find the required return on the share re.

rf = 1.5%rm = 7.5%β = 1.3
re = %
2.Easy
years0123…9Pp​ = €33€7.50€7.50€7.50…rp​ = ?

A company's preferred shares pay a fixed dividend of €7.50 per year and trade at €33. The tax rate is 28%. Find the cost of preferred stock rp.

Dp = €7.50Pp = €33T = 28%
rp = %
3.Medium
WACC = ?equity€8 000 000re​ = 9%debt€1 000 000rd​ = 4.5%T = 30%

A company has equity worth €8 000 000 and debt worth €1 000 000. Its cost of equity is 9%, its pre-tax cost of debt is 4.5% and the tax rate is 30%. Find the WACC.

E = €8 000 000D = €1 000 000re = 9%rd = 4.5%T = 30%
WACC = %
4.Medium
WACC = ?equityEre​ = 14%debtD = 0.25·Erd​ = 4%T = 30%

A company has a debt-to-equity ratio (at market values) of 0.25. Its cost of equity is 14%, its pre-tax cost of debt is 4% and the tax rate is 30%. Find the WACC.

D/E = 0.25re = 14%rd = 4%T = 30%
WACC = %
5.Hard
rf​ = 2.5%, rm​ − rf​ = 6%D/E = 0.5equityβL​ = 1debtD/E = 0.75equityre​ = ?debtT = 21%

A company's shares have a beta of 1 at its current debt-to-equity ratio of 0.5. It plans to raise its debt-to-equity ratio to 0.75. The tax rate is 21%, the risk-free rate 2.5% and the market risk premium 6%. Find the cost of equity re after the change.

βL = 1D/E1 = 0.5D/E2 = 0.75T = 21%rf = 2.5%rm − rf = 6%
re = %
6.Hard
WACC = ?equity5 000 000 × €26.50D0​ = €2.90g = 5%debt€66 300 000rd​ = 4%T = 25%

A company has 5 000 000 shares trading at €26.50; the book value of its equity is €66 300 000. It just paid a dividend of €2.90 per share, and dividends grow by 5% per year. Its debt has a market value of €66 300 000 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 = 5 000 000P0 = €26.50book equity = €66 300 000D0 = €2.90g = 5%D = €66 300 000rd = 4%T = 25%
WACC = %

Answer key

  1. 1. re = 9.3 %
  2. 2. rp = 22.73 %
  3. 3. WACC = 8.35 %
  4. 4. WACC = 11.76 %
  5. 5. re = 9.349 %
  6. 6. WACC = 11.99 %

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