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​ = 7.5%β = 1.1re​ = ?

The risk-free rate is 2.5%, the expected market return is 7.5% and a share has a beta of 1.1. Use CAPM to find the required return on the share re.

rf = 2.5%rm = 7.5%β = 1.1
re = %
2.Easy
years0123…9Pp​ = €96€4.50€4.50€4.50…rp​ = ?

A company's preferred shares pay a fixed dividend of €4.50 per year and trade at €96. The tax rate is 30%. Find the cost of preferred stock rp.

Dp = €4.50Pp = €96T = 30%
rp = %
3.Medium
WACC = ?ordinary shares€4 000 000re​ = 14%preferred shares€1 500 000rp​ = 7%debt€5 000 000rd​ = 4.5%T = 30%

A company is financed with ordinary shares worth €4 000 000, preferred shares worth €1 500 000 and debt worth €5 000 000. The cost of equity is 14%, the cost of preferred stock 7% and the pre-tax cost of debt 4.5%. The tax rate is 30%. Find the WACC.

E = €4 000 000Ps = €1 500 000D = €5 000 000re = 14%rp = 7%rd = 4.5%T = 30%
WACC = %
4.Medium
WACC = 7.63%equity€3 000 000re​ = ?debt€4 000 000rd​ = 4.5%T = 20%

A company has equity worth €3 000 000 and debt worth €4 000 000. Its WACC is 7.63%, its pre-tax cost of debt is 4.5% and the tax rate is 20%. Find the cost of equity re.

E = €3 000 000D = €4 000 000WACC = 7.63%rd = 4.5%T = 20%
re = %
5.Hard
rf​ = 1%, rm​ − rf​ = 5.5%no debtequityβU​ = 1D/E = 0.4equityre​ = ?debtT = 28%

A company's business has an unlevered (asset) beta of 1. It plans a debt-to-equity ratio of 0.4. The tax rate is 28%, the risk-free rate is 1% and the market risk premium is 5.5%. Find the cost of equity re at the new capital structure.

βU = 1D/E = 0.4T = 28%rf = 1%rm − rf = 5.5%
re = %
6.Hard
rf​ = 3%, rm​ − rf​ = 4%no debtequityβU​ = 1.2D/E = 0.75equityre​ = ?debtT = 25%

A company's business has an unlevered (asset) beta of 1.2. 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%. Find the cost of equity re at the new capital structure.

βU = 1.2D/E = 0.75T = 25%rf = 3%rm − rf = 4%
re = %

Answer key

  1. 1. re = 8 %
  2. 2. rp = 4.688 %
  3. 3. WACC = 7.833 %
  4. 4. re = 13 %
  5. 5. re = 8.084 %
  6. 6. re = 10.5 %

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