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%β = 1rm​ = 7%β = 1.5re​ = ?

The risk-free rate is 1%, the expected market return is 7% and a share has a beta of 1.5. Use CAPM to find the required return on the share re.

rf = 1%rm = 7%β = 1.5
re = %
2.Easy
βr (%)SMLrf​ = 3%β = 1rm​ = 7%β = 0.6re​ = ?

The risk-free rate is 3%, the expected market return is 7% and a share has a beta of 0.6. Use CAPM to find the required return on the share re.

rf = 3%rm = 7%β = 0.6
re = %
3.Medium
βr (%)SMLrf​ = 1%β = 1rm​ = ?β = 1.5re​ = 7%

A share with a beta of 1.5 has a required return of 7%. The risk-free rate is 1%. What expected market return rm does CAPM imply?

β = 1.5re = 7%rf = 1%
rm = %
4.Medium
WACC = ?equity€12 000 000re​ = 14%debt€1 000 000rd​ = 3.5%T = 20%

A company has equity worth €12 000 000 and debt worth €1 000 000. Its cost of equity is 14%, its pre-tax cost of debt is 3.5% and the tax rate is 20%. Find the WACC.

E = €12 000 000D = €1 000 000re = 14%rd = 3.5%T = 20%
WACC = %
5.Hard
rf​ = 2%, rm​ − rf​ = 4%D/E = 0.4equityβL​ = 0.9debtD/E = 1.5equityre​ = ?debtT = 30%

A company's shares have a beta of 0.9 at its current debt-to-equity ratio of 0.4. It plans to raise its debt-to-equity ratio to 1.5. The tax rate is 30%, the risk-free rate 2% and the market risk premium 4%. Find the cost of equity re after the change.

βL = 0.9D/E1 = 0.4D/E2 = 1.5T = 30%rf = 2%rm − rf = 4%
re = %
6.Hard
rf​ = 1%, rm​ − rf​ = 6%no debtequityβU​ = 0.7D/E = 1.5equityre​ = ?debtT = 28%

A company's business has an unlevered (asset) beta of 0.7. It plans a debt-to-equity ratio of 1.5. The tax rate is 28%, the risk-free rate is 1% and the market risk premium is 6%. Find the cost of equity re at the new capital structure.

βU = 0.7D/E = 1.5T = 28%rf = 1%rm − rf = 6%
re = %

Answer key

  1. 1. re = 10 %
  2. 2. re = 5.4 %
  3. 3. rm = 5 %
  4. 4. WACC = 13.14 %
  5. 5. re = 7.766 %
  6. 6. re = 9.736 %

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