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​ = 4%β = 1rm​ = 9%β = 1.1re​ = ?

The risk-free rate is 4%, the expected market return is 9% and a share has a beta of 1.1. Use CAPM to find the required return on the share re.

rf = 4%rm = 9%β = 1.1
re = %
2.Easy
βr (%)SMLrf​ = 1%β = 1rm​ = 5%β = 1.2re​ = ?

The risk-free rate is 1%, the expected market return is 5% and a share has a beta of 1.2. Use CAPM to find the required return on the share re.

rf = 1%rm = 5%β = 1.2
re = %
3.Medium
βr (%)SMLrf​ = 4%β = 1rm​ = ?β = 0.8re​ = 7.6%

A share with a beta of 0.8 has a required return of 7.6%. The risk-free rate is 4%. What expected market return rm does CAPM imply?

β = 0.8re = 7.6%rf = 4%
rm = %
4.Medium
WACC = ?equityEre​ = 14%debtD = 0.6·Erd​ = 6%T = 25.8%

A company has a debt-to-equity ratio (at market values) of 0.6. Its cost of equity is 14%, its pre-tax cost of debt is 6% and the tax rate is 25.8%. Find the WACC.

D/E = 0.6re = 14%rd = 6%T = 25.8%
WACC = %
5.Hard
WACC = ?equity1 000 000 × €48.00β = 1.8rf​ = 2.5%, rm​ = 7%debt20 000 × €1 050rd​ = 4.5%T = 28%

A company has 1 000 000 shares at €48.00 each and 20 000 bonds trading at €1 050 each. The pre-tax cost of debt is 4.5% and the tax rate is 28%. The share’s beta is 1.8, the risk-free rate 2.5% and the market return 7%. Find the WACC.

β = 1.8rf = 2.5%rm = 7%rd = 4.5%T = 28%
WACC = %
6.Hard
rf​ = 2.5%, rm​ − rf​ = 7%no debtequityβU​ = 0.6D/E = 0.25equityre​ = ?debtT = 28%

A company's business has an unlevered (asset) beta of 0.6. It plans a debt-to-equity ratio of 0.25. The tax rate is 28%, the risk-free rate is 2.5% and the market risk premium is 7%. Find the cost of equity re at the new capital structure.

βU = 0.6D/E = 0.25T = 28%rf = 2.5%rm − rf = 7%
re = %

Answer key

  1. 1. re = 9.5 %
  2. 2. re = 5.8 %
  3. 3. rm = 8.5 %
  4. 4. WACC = 10.42 %
  5. 5. WACC = 8.36 %
  6. 6. re = 7.456 %

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