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​ = 6%β = ?re​ = 8.25%

Investors require a return of 8.25% on a share. The risk-free rate is 1.5% and the expected market return is 6%. Use CAPM to find the beta β of the share.

re = 8.25%rf = 1.5%rm = 6%
β =
2.Easy
Dloans€12 000 000I = €600 000tax savingT = 25.8%interest after tax?rd​·(1 − T) = ?

A company has loans of €12 000 000 on which it pays €600 000 interest per year. The tax rate is 25.8%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €12 000 000I = €600 000T = 25.8%
rd·(1 − T) = %
3.Medium
βr (%)SMLrf​ = 3.5%β = 1rm​ = ?β = 0.6re​ = 7.1%

A share with a beta of 0.6 has a required return of 7.1%. The risk-free rate is 3.5%. What expected market return rm does CAPM imply?

β = 0.6re = 7.1%rf = 3.5%
rm = %
4.Medium
βr (%)SMLrf​ = 3.5%β = 1rm​ = ?β = 1.6re​ = 12.3%

A share with a beta of 1.6 has a required return of 12.3%. The risk-free rate is 3.5%. What expected market return rm does CAPM imply?

β = 1.6re = 12.3%rf = 3.5%
rm = %
5.Hard
WACC = ?equity€8 000 000re​ = 10%bonds2 000 × €1 018coupon 5%, n = 4T = 20%

A company has equity with a market value of €8 000 000 and a cost of equity of 10%. Its debt consists of 2 000 bonds (face value €1 000, annual coupon 5%, 4 years to maturity) that trade at €1 018 each. The tax rate is 20%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €8 000 000re = 10%bonds: 2 000 × €1 018coupon = 5%n = 4T = 20%
WACC = %
6.Hard
WACC = ?equity€15 000 000re​ = 10%bonds5 000 × €1 070coupon 4%, n = 8T = 30%

A company has equity with a market value of €15 000 000 and a cost of equity of 10%. Its debt consists of 5 000 bonds (face value €1 000, annual coupon 4%, 8 years to maturity) that trade at €1 070 each. The tax rate is 30%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €15 000 000re = 10%bonds: 5 000 × €1 070coupon = 4%n = 8T = 30%
WACC = %

Answer key

  1. 1. β = 1.5
  2. 2. rd·(1 − T) = 3.71 %
  3. 3. rm = 9.5 %
  4. 4. rm = 9 %
  5. 5. WACC = 8.701 %
  6. 6. WACC = 7.924 %

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