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​ = 3.5%β = 1rm​ = 7.5%β = 1.8re​ = ?

The risk-free rate is 3.5%, the expected market return is 7.5% and a share has a beta of 1.8. Use CAPM to find the required return on the share re.

rf = 3.5%rm = 7.5%β = 1.8
re = %
2.Easy
βr (%)SMLrf​ = 3%β = 1rm​ = 8%β = 0.6re​ = ?

The risk-free rate is 3%, the expected market return is 8% and a share has a beta of 0.6. Use CAPM to find the required return on the share re.

rf = 3%rm = 8%β = 0.6
re = %
3.Medium
WACC = ?equity€2 000 000re​ = 9%debt€3 000 000rd​ = 5%T = 28%

A company has equity worth €2 000 000 and debt worth €3 000 000. Its cost of equity is 9%, its pre-tax cost of debt is 5% and the tax rate is 28%. Find the WACC.

E = €2 000 000D = €3 000 000re = 9%rd = 5%T = 28%
WACC = %
4.Medium
WACC = ?ordinary shares€6 000 000re​ = 14%preferred shares€1 000 000rp​ = 7.5%debt€5 000 000rd​ = 3%T = 25%

A company is financed with ordinary shares worth €6 000 000, preferred shares worth €1 000 000 and debt worth €5 000 000. The cost of equity is 14%, the cost of preferred stock 7.5% and the pre-tax cost of debt 3%. The tax rate is 25%. Find the WACC.

E = €6 000 000Ps = €1 000 000D = €5 000 000re = 14%rp = 7.5%rd = 3%T = 25%
WACC = %
5.Hard
rf​ = 1%, rm​ − rf​ = 6%D/E = 0.2equityβL​ = 0.9debtD/E = 1equityre​ = ?debtT = 25%

A company's shares have a beta of 0.9 at its current debt-to-equity ratio of 0.2. It plans to raise its debt-to-equity ratio to 1. The tax rate is 25%, the risk-free rate 1% and the market risk premium 6%. Find the cost of equity re after the change.

βL = 0.9D/E1 = 0.2D/E2 = 1T = 25%rf = 1%rm − rf = 6%
re = %
6.Hard
WACC = ?equity2 500 000 × €9.50β = 0.8rf​ = 2%, rm​ = 6%debt10 000 × €980rd​ = 5%T = 21%

A company has 2 500 000 shares at €9.50 each and 10 000 bonds trading at €980 each. The pre-tax cost of debt is 5% and the tax rate is 21%. The share’s beta is 0.8, the risk-free rate 2% and the market return 6%. Find the WACC.

β = 0.8rf = 2%rm = 6%rd = 5%T = 21%
WACC = %

Answer key

  1. 1. re = 10.7 %
  2. 2. re = 6 %
  3. 3. WACC = 5.76 %
  4. 4. WACC = 8.563 %
  5. 5. re = 9.217 %
  6. 6. WACC = 4.835 %

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