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​ = 5%β = 0.6re​ = ?

The risk-free rate is 1%, the expected market return is 5% and a share has a beta of 0.6. Use CAPM to find the required return on the share re.

rf = 1%rm = 5%β = 0.6
re = %
2.Easy
Dloans€5 000 000I = €250 000tax savingT = 28%interest after tax?rd​·(1 − T) = ?

A company has loans of €5 000 000 on which it pays €250 000 interest per year. The tax rate is 28%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €5 000 000I = €250 000T = 28%
rd·(1 − T) = %
3.Medium
WACC = ?equity€6 000 000re​ = 8%debt€3 000 000rd​ = 7%T = 25%

A company has equity worth €6 000 000 and debt worth €3 000 000. Its cost of equity is 8%, its pre-tax cost of debt is 7% and the tax rate is 25%. Find the WACC.

E = €6 000 000D = €3 000 000re = 8%rd = 7%T = 25%
WACC = %
4.Medium
WACC = ?ordinary shares€4 000 000re​ = 10%preferred shares€1 500 000rp​ = 7%debt€2 000 000rd​ = 6%T = 25%

A company is financed with ordinary shares worth €4 000 000, preferred shares worth €1 500 000 and debt worth €2 000 000. The cost of equity is 10%, the cost of preferred stock 7% and the pre-tax cost of debt 6%. The tax rate is 25%. Find the WACC.

E = €4 000 000Ps = €1 500 000D = €2 000 000re = 10%rp = 7%rd = 6%T = 25%
WACC = %
5.Hard
rf​ = 3.5%, rm​ − rf​ = 6%D/E = 0.25equityβL​ = 0.9debtD/E = 1equityre​ = ?debtT = 21%

A company's shares have a beta of 0.9 at its current debt-to-equity ratio of 0.25. It plans to raise its debt-to-equity ratio to 1. The tax rate is 21%, the risk-free rate 3.5% and the market risk premium 6%. Find the cost of equity re after the change.

βL = 0.9D/E1 = 0.25D/E2 = 1T = 21%rf = 3.5%rm − rf = 6%
re = %
6.Hard
WACC = ?equity2 000 000 × €42.50β = 1.8rf​ = 3%, rm​ = 9.5%debt5 000 × €980rd​ = 4.5%T = 25%

A company has 2 000 000 shares at €42.50 each and 5 000 bonds trading at €980 each. The pre-tax cost of debt is 4.5% and the tax rate is 25%. The share’s beta is 1.8, the risk-free rate 3% and the market return 9.5%. Find the WACC.

β = 1.8rf = 3%rm = 9.5%rd = 4.5%T = 25%
WACC = %

Answer key

  1. 1. re = 3.4 %
  2. 2. rd·(1 − T) = 3.6 %
  3. 3. WACC = 7.083 %
  4. 4. WACC = 7.933 %
  5. 5. re = 11.57 %
  6. 6. WACC = 14.08 %

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