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​ = 9.5%β = 1.8re​ = ?

The risk-free rate is 2.5%, the expected market return is 9.5% and a share has a beta of 1.8. Use CAPM to find the required return on the share re.

rf = 2.5%rm = 9.5%β = 1.8
re = %
2.Easy
βr (%)SMLrf​ = 2%β = 1rm​ = 7.5%β = 0.6re​ = ?

The risk-free rate is 2%, the expected market return is 7.5% and a share has a beta of 0.6. Use CAPM to find the required return on the share re.

rf = 2%rm = 7.5%β = 0.6
re = %
3.Medium
βr (%)SMLrf​ = 1%β = 1rm​ = ?β = 0.8re​ = 5.4%

A share with a beta of 0.8 has a required return of 5.4%. The risk-free rate is 1%. What expected market return rm does CAPM imply?

β = 0.8re = 5.4%rf = 1%
rm = %
4.Medium
WACC = ?equity€8 000 000re​ = 9%debt€1 000 000rd​ = 7%T = 25%

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 7% and the tax rate is 25%. Find the WACC.

E = €8 000 000D = €1 000 000re = 9%rd = 7%T = 25%
WACC = %
5.Hard
rf​ = 1.5%, rm​ − rf​ = 5.5%no debtequityβU​ = 0.7D/E = 0.6equityre​ = ?debtT = 21%

A company's business has an unlevered (asset) beta of 0.7. It plans a debt-to-equity ratio of 0.6. The tax rate is 21%, the risk-free rate is 1.5% and the market risk premium is 5.5%. Find the cost of equity re at the new capital structure.

βU = 0.7D/E = 0.6T = 21%rf = 1.5%rm − rf = 5.5%
re = %
6.Hard
WACC = ?equity1 000 000 × €34.00D0​ = €0.70g = 5%debt€10 200 000rd​ = 5%T = 21%

A company has 1 000 000 shares trading at €34.00; the book value of its equity is €10 200 000. It just paid a dividend of €0.70 per share, and dividends grow by 5% per year. Its debt has a market value of €10 200 000 and a pre-tax cost of 5%. The tax rate is 21%. Find the WACC, using the dividend growth model for the cost of equity.

N = 1 000 000P0 = €34.00book equity = €10 200 000D0 = €0.70g = 5%D = €10 200 000rd = 5%T = 21%
WACC = %

Answer key

  1. 1. re = 15.1 %
  2. 2. re = 5.3 %
  3. 3. rm = 6.5 %
  4. 4. WACC = 8.583 %
  5. 5. re = 7.175 %
  6. 6. WACC = 6.421 %

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