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
βr (%)SMLrf​ = 2%β = 1rm​ = 9%β = 1.5re​ = ?

The risk-free rate is 2%, the expected market return is 9% and a share has a beta of 1.5. Use CAPM to find the required return on the share re.

rf = 2%rm = 9%β = 1.5
re = %
2.Easy
βr (%)SMLrf​ = 2%β = 1rm​ = 7%β = ?re​ = 11%

Investors require a return of 11% on a share. The risk-free rate is 2% and the expected market return is 7%. Use CAPM to find the beta β of the share.

re = 11%rf = 2%rm = 7%
β =
3.Medium
βr (%)SMLrf​ = 2%β = 1rm​ = ?β = 2re​ = 13%

A share with a beta of 2 has a required return of 13%. The risk-free rate is 2%. What expected market return rm does CAPM imply?

β = 2re = 13%rf = 2%
rm = %
4.Medium
WACC = ?equityEre​ = 9%debtD = 0.5·Erd​ = 3.5%T = 25.8%

A company has a debt-to-equity ratio (at market values) of 0.5. Its cost of equity is 9%, its pre-tax cost of debt is 3.5% and the tax rate is 25.8%. Find the WACC.

D/E = 0.5re = 9%rd = 3.5%T = 25.8%
WACC = %
5.Hard
WACC = ?equity€5 000 000re​ = 11%bonds8 000 × €1 043coupon 6%, n = 5T = 25.8%

A company has equity with a market value of €5 000 000 and a cost of equity of 11%. Its debt consists of 8 000 bonds (face value €1 000, annual coupon 6%, 5 years to maturity) that trade at €1 043 each. The tax rate is 25.8%. Find the WACC, using the yield to maturity of the bonds as the pre-tax cost of debt.

E = €5 000 000re = 11%bonds: 8 000 × €1 043coupon = 6%n = 5T = 25.8%
WACC = %
6.Hard
rf​ = 1%, rm​ − rf​ = 6%D/E = 0.4equityβL​ = 1debtD/E = 1.5equityre​ = ?debtT = 28%

A company's shares have a beta of 1 at its current debt-to-equity ratio of 0.4. It plans to raise its debt-to-equity ratio to 1.5. The tax rate is 28%, the risk-free rate 1% and the market risk premium 6%. Find the cost of equity re after the change.

βL = 1D/E1 = 0.4D/E2 = 1.5T = 28%rf = 1%rm − rf = 6%
re = %

Answer key

  1. 1. re = 12.5 %
  2. 2. β = 1.8
  3. 3. rm = 7.5 %
  4. 4. WACC = 6.866 %
  5. 5. WACC = 6.445 %
  6. 6. re = 10.69 %

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