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
Dloans€10 000 000I = €300 000tax savingT = 30%interest after tax?rd​·(1 − T) = ?

A company has loans of €10 000 000 on which it pays €300 000 interest per year. The tax rate is 30%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €10 000 000I = €300 000T = 30%
rd·(1 − T) = %
2.Easy
βr (%)SMLrf​ = 2.5%β = 1rm​ = 9%β = 1.1re​ = ?

The risk-free rate is 2.5%, the expected market return is 9% and a share has a beta of 1.1. Use CAPM to find the required return on the share re.

rf = 2.5%rm = 9%β = 1.1
re = %
3.Medium
WACC = 10.68%equity€5 000 000re​ = ?debt€2 000 000rd​ = 3%T = 21%

A company has equity worth €5 000 000 and debt worth €2 000 000. Its WACC is 10.68%, its pre-tax cost of debt is 3% and the tax rate is 21%. Find the cost of equity re.

E = €5 000 000D = €2 000 000WACC = 10.68%rd = 3%T = 21%
re = %
4.Medium
βr (%)SMLrf​ = 4%β = 1rm​ = ?β = 0.9re​ = 9.4%

A share with a beta of 0.9 has a required return of 9.4%. The risk-free rate is 4%. What expected market return rm does CAPM imply?

β = 0.9re = 9.4%rf = 4%
rm = %
5.Hard
WACC = ?equity4 000 000 × €14.50β = 0.6rf​ = 2.5%, rm​ = 9.5%debt10 000 × €1 050rd​ = 3.5%T = 28%

A company has 4 000 000 shares at €14.50 each and 10 000 bonds trading at €1 050 each. The pre-tax cost of debt is 3.5% and the tax rate is 28%. The share’s beta is 0.6, the risk-free rate 2.5% and the market return 9.5%. Find the WACC.

β = 0.6rf = 2.5%rm = 9.5%rd = 3.5%T = 28%
WACC = %
6.Hard
rf​ = 2.5%, rm​ − rf​ = 5%no debtequityβU​ = 0.8D/E = 1equityre​ = ?debtT = 30%

A company's business has an unlevered (asset) beta of 0.8. It plans a debt-to-equity ratio of 1. The tax rate is 30%, the risk-free rate is 2.5% and the market risk premium is 5%. Find the cost of equity re at the new capital structure.

βU = 0.8D/E = 1T = 30%rf = 2.5%rm − rf = 5%
re = %

Answer key

  1. 1. rd·(1 − T) = 2.1 %
  2. 2. re = 9.65 %
  3. 3. re = 14 %
  4. 4. rm = 10 %
  5. 5. WACC = 6.059 %
  6. 6. re = 9.3 %

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