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.

New worksheetPractise online with hints

For teachers: free to print, copy and use in class. Every new worksheet has new values and its own answer key. A link to ExamProblems on your course page is appreciated.

Name: ____________________   Date: ____________

1.Easy
years0123…9P0​ = €41.50D1​D2​D3​…D0​ = €3.20, g = 4%, re​ = ?

A company has just paid a dividend of €3.20 per share. Dividends are expected to grow by 4% per year forever, and the share price is €41.50. Use the dividend growth model to find the cost of equity re.

D0 = €3.20g = 4%P0 = €41.50
re = %
2.Easy
βr (%)SMLrf​ = 4%β = 1rm​ = 9.5%β = 1.5re​ = ?

The risk-free rate is 4%, the expected market return is 9.5% and a share has a beta of 1.5. Use CAPM to find the required return on the share re.

rf = 4%rm = 9.5%β = 1.5
re = %
3.Medium
WACC = ?equity€6 000 000re​ = 8%debt€4 000 000rd​ = 5%T = 25%

A company has equity worth €6 000 000 and debt worth €4 000 000. Its cost of equity is 8%, its pre-tax cost of debt is 5% and the tax rate is 25%. Find the WACC.

E = €6 000 000D = €4 000 000re = 8%rd = 5%T = 25%
WACC = %
4.Medium
WACC = ?equityEre​ = 9%debtD = 0.6·Erd​ = 4%T = 21%

A company has a debt-to-equity ratio (at market values) of 0.6. Its cost of equity is 9%, its pre-tax cost of debt is 4% and the tax rate is 21%. Find the WACC.

D/E = 0.6re = 9%rd = 4%T = 21%
WACC = %
5.Hard
rf​ = 4%, rm​ − rf​ = 6%D/E = 0.4equityβL​ = 1.5debtD/E = 0.6equityre​ = ?debtT = 25.8%

A company's shares have a beta of 1.5 at its current debt-to-equity ratio of 0.4. It plans to raise its debt-to-equity ratio to 0.6. The tax rate is 25.8%, the risk-free rate 4% and the market risk premium 6%. Find the cost of equity re after the change.

βL = 1.5D/E1 = 0.4D/E2 = 0.6T = 25.8%rf = 4%rm − rf = 6%
re = %
6.Hard
WACC = ?equity5 000 000 × €30.50D0​ = €0.80g = 5%debt€45 800 000rd​ = 4%T = 25%

A company has 5 000 000 shares trading at €30.50; the book value of its equity is €45 800 000. It just paid a dividend of €0.80 per share, and dividends grow by 5% per year. Its debt has a market value of €45 800 000 and a pre-tax cost of 4%. The tax rate is 25%. Find the WACC, using the dividend growth model for the cost of equity.

N = 5 000 000P0 = €30.50book equity = €45 800 000D0 = €0.80g = 5%D = €45 800 000rd = 4%T = 25%
WACC = %

Answer key

  1. 1. re = 12.02 %
  2. 2. re = 12.25 %
  3. 3. WACC = 6.3 %
  4. 4. WACC = 6.81 %
  5. 5. re = 14.03 %
  6. 6. WACC = 6.656 %

Full step-by-step solutions: practise this topic on examproblems.com.