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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Name: ____________________   Date: ____________

1.Easy
βr (%)SMLrf​ = 3.5%β = 1rm​ = 7.5%β = 0.9re​ = ?

The risk-free rate is 3.5%, the expected market return is 7.5% and a share has a beta of 0.9. Use CAPM to find the required return on the share re.

rf = 3.5%rm = 7.5%β = 0.9
re = %
2.Easy
years0123…9Pp​ = €53€7.00€7.00€7.00…rp​ = ?

A company's preferred shares pay a fixed dividend of €7.00 per year and trade at €53. The tax rate is 20%. Find the cost of preferred stock rp.

Dp = €7.00Pp = €53T = 20%
rp = %
3.Medium
WACC = ?equity€4 000 000re​ = 13%debt€5 000 000rd​ = 4%T = 28%

A company has equity worth €4 000 000 and debt worth €5 000 000. Its cost of equity is 13%, its pre-tax cost of debt is 4% and the tax rate is 28%. Find the WACC.

E = €4 000 000D = €5 000 000re = 13%rd = 4%T = 28%
WACC = %
4.Medium
WACC = ?equity€12 000 000re​ = 8%debt€2 000 000rd​ = 4%T = 25%

A company has equity worth €12 000 000 and debt worth €2 000 000. Its cost of equity is 8%, its pre-tax cost of debt is 4% and the tax rate is 25%. Find the WACC.

E = €12 000 000D = €2 000 000re = 8%rd = 4%T = 25%
WACC = %
5.Hard
rf​ = 1.5%, rm​ − rf​ = 7%no debtequityβU​ = 0.6D/E = 0.5equityre​ = ?debtT = 30%

A company's business has an unlevered (asset) beta of 0.6. It plans a debt-to-equity ratio of 0.5. The tax rate is 30%, the risk-free rate is 1.5% and the market risk premium is 7%. Find the cost of equity re at the new capital structure.

βU = 0.6D/E = 0.5T = 30%rf = 1.5%rm − rf = 7%
re = %
6.Hard
WACC = ?equity2 000 000 × €44.00D0​ = €2.30g = 5%debt€26 400 000rd​ = 3%T = 25%

A company has 2 000 000 shares trading at €44.00; the book value of its equity is €35 200 000. It just paid a dividend of €2.30 per share, and dividends grow by 5% per year. Its debt has a market value of €26 400 000 and a pre-tax cost of 3%. The tax rate is 25%. Find the WACC, using the dividend growth model for the cost of equity.

N = 2 000 000P0 = €44.00book equity = €35 200 000D0 = €2.30g = 5%D = €26 400 000rd = 3%T = 25%
WACC = %

Answer key

  1. 1. re = 7.1 %
  2. 2. rp = 13.21 %
  3. 3. WACC = 7.378 %
  4. 4. WACC = 7.286 %
  5. 5. re = 7.17 %
  6. 6. WACC = 8.587 %

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