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​ = 10%β = 0.8re​ = ?

The risk-free rate is 4%, the expected market return is 10% and a share has a beta of 0.8. Use CAPM to find the required return on the share re.

rf = 4%rm = 10%β = 0.8
re = %
2.Easy
years0123…9Pp​ = €27€7.00€7.00€7.00…rp​ = ?

A company's preferred shares pay a fixed dividend of €7.00 per year and trade at €27. The tax rate is 20%. Find the cost of preferred stock rp.

Dp = €7.00Pp = €27T = 20%
rp = %
3.Medium
WACC = ?ordinary shares€6 000 000re​ = 12%preferred shares€1 500 000rp​ = 7%debt€5 000 000rd​ = 4%T = 25.8%

A company is financed with ordinary shares worth €6 000 000, preferred shares worth €1 500 000 and debt worth €5 000 000. The cost of equity is 12%, the cost of preferred stock 7% and the pre-tax cost of debt 4%. The tax rate is 25.8%. Find the WACC.

E = €6 000 000Ps = €1 500 000D = €5 000 000re = 12%rp = 7%rd = 4%T = 25.8%
WACC = %
4.Medium
WACC = ?equity€2 000 000re​ = 9%debt€5 000 000rd​ = 4.5%T = 30%

A company has equity worth €2 000 000 and debt worth €5 000 000. Its cost of equity is 9%, its pre-tax cost of debt is 4.5% and the tax rate is 30%. Find the WACC.

E = €2 000 000D = €5 000 000re = 9%rd = 4.5%T = 30%
WACC = %
5.Hard
WACC = ?equity4 000 000 × €45.00D0​ = €2.80g = 3%debt€180 000 000rd​ = 4%T = 20%

A company has 4 000 000 shares trading at €45.00; the book value of its equity is €72 000 000. It just paid a dividend of €2.80 per share, and dividends grow by 3% per year. Its debt has a market value of €180 000 000 and a pre-tax cost of 4%. The tax rate is 20%. Find the WACC, using the dividend growth model for the cost of equity.

N = 4 000 000P0 = €45.00book equity = €72 000 000D0 = €2.80g = 3%D = €180 000 000rd = 4%T = 20%
WACC = %
6.Hard
rf​ = 3.5%, rm​ − rf​ = 6%D/E = 0.2equityβL​ = 1.2debtD/E = 0.6equityre​ = ?debtT = 30%

A company's shares have a beta of 1.2 at its current debt-to-equity ratio of 0.2. It plans to raise its debt-to-equity ratio to 0.6. The tax rate is 30%, the risk-free rate 3.5% and the market risk premium 6%. Find the cost of equity re after the change.

βL = 1.2D/E1 = 0.2D/E2 = 0.6T = 30%rf = 3.5%rm − rf = 6%
re = %

Answer key

  1. 1. re = 8.8 %
  2. 2. rp = 25.93 %
  3. 3. WACC = 7.787 %
  4. 4. WACC = 4.821 %
  5. 5. WACC = 6.304 %
  6. 6. re = 12.47 %

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