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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Name: ____________________   Date: ____________

1.Easy
years0123…9P0​ = €46.50D1​D2​D3​…D0​ = €3.20, g = 2%, re​ = ?

A company has just paid a dividend of €3.20 per share. Dividends are expected to grow by 2% per year forever, and the share price is €46.50. Use the dividend growth model to find the cost of equity re.

D0 = €3.20g = 2%P0 = €46.50
re = %
2.Easy
βr (%)SMLrf​ = 3%β = 1rm​ = 8%β = 1.2re​ = ?

The risk-free rate is 3%, the expected market return is 8% and a share has a beta of 1.2. Use CAPM to find the required return on the share re.

rf = 3%rm = 8%β = 1.2
re = %
3.Medium
WACC = ?equityEre​ = 11%debtD = 0.5·Erd​ = 6%T = 25.8%

A company has a debt-to-equity ratio (at market values) of 0.5. Its cost of equity is 11%, its pre-tax cost of debt is 6% and the tax rate is 25.8%. Find the WACC.

D/E = 0.5re = 11%rd = 6%T = 25.8%
WACC = %
4.Medium
WACC = ?equity€2 000 000re​ = 14%debt€5 000 000rd​ = 3.5%T = 28%

A company has equity worth €2 000 000 and debt worth €5 000 000. Its cost of equity is 14%, its pre-tax cost of debt is 3.5% and the tax rate is 28%. Find the WACC.

E = €2 000 000D = €5 000 000re = 14%rd = 3.5%T = 28%
WACC = %
5.Hard
rf​ = 3.5%, rm​ − rf​ = 7%no debtequityβU​ = 0.7D/E = 0.75equityre​ = ?debtT = 30%

A company's business has an unlevered (asset) beta of 0.7. It plans a debt-to-equity ratio of 0.75. The tax rate is 30%, the risk-free rate is 3.5% and the market risk premium is 7%. Find the cost of equity re at the new capital structure.

βU = 0.7D/E = 0.75T = 30%rf = 3.5%rm − rf = 7%
re = %
6.Hard
WACC = ?equity€10 000 000re​ = 13%bonds5 000 × €1 070coupon 4%, n = 5T = 20%

A company has equity with a market value of €10 000 000 and a cost of equity of 13%. Its debt consists of 5 000 bonds (face value €1 000, annual coupon 4%, 5 years to maturity) that trade at €1 070 each. The tax rate is 20%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €10 000 000re = 13%bonds: 5 000 × €1 070coupon = 4%n = 5T = 20%
WACC = %

Answer key

  1. 1. re = 9.019 %
  2. 2. re = 9 %
  3. 3. WACC = 8.817 %
  4. 4. WACC = 5.8 %
  5. 5. re = 10.97 %
  6. 6. WACC = 9.164 %

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