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​ = 2.5%β = 1rm​ = 9.5%β = 1.8re​ = ?

The risk-free rate is 2.5%, the expected market return is 9.5% and a share has a beta of 1.8. Use CAPM to find the required return on the share re.

rf = 2.5%rm = 9.5%β = 1.8
re = %
2.Easy
βr (%)SMLrf​ = 3%β = 1rm​ = 9.5%β = 1.5re​ = ?

The risk-free rate is 3%, 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 = 3%rm = 9.5%β = 1.5
re = %
3.Medium
WACC = ?ordinary shares€8 000 000re​ = 10%preferred shares€1 000 000rp​ = 7.5%debt€6 000 000rd​ = 4.5%T = 21%

A company is financed with ordinary shares worth €8 000 000, preferred shares worth €1 000 000 and debt worth €6 000 000. The cost of equity is 10%, the cost of preferred stock 7.5% and the pre-tax cost of debt 4.5%. The tax rate is 21%. Find the WACC.

E = €8 000 000Ps = €1 000 000D = €6 000 000re = 10%rp = 7.5%rd = 4.5%T = 21%
WACC = %
4.Medium
WACC = 10.54%equity€3 000 000re​ = ?debt€1 000 000rd​ = 4.5%T = 30%

A company has equity worth €3 000 000 and debt worth €1 000 000. Its WACC is 10.54%, its pre-tax cost of debt is 4.5% and the tax rate is 30%. Find the cost of equity re.

E = €3 000 000D = €1 000 000WACC = 10.54%rd = 4.5%T = 30%
re = %
5.Hard
rf​ = 3.5%, rm​ − rf​ = 7%D/E = 0.4equityβL​ = 1.3debtD/E = 0.75equityre​ = ?debtT = 28%

A company's shares have a beta of 1.3 at its current debt-to-equity ratio of 0.4. It plans to raise its debt-to-equity ratio to 0.75. The tax rate is 28%, the risk-free rate 3.5% and the market risk premium 7%. Find the cost of equity re after the change.

βL = 1.3D/E1 = 0.4D/E2 = 0.75T = 28%rf = 3.5%rm − rf = 7%
re = %
6.Hard
WACC = ?equity2 000 000 × €13.50D0​ = €1.70g = 2%debt€16 200 000rd​ = 4.5%T = 30%

A company has 2 000 000 shares trading at €13.50; the book value of its equity is €10 800 000. It just paid a dividend of €1.70 per share, and dividends grow by 2% per year. Its debt has a market value of €16 200 000 and a pre-tax cost of 4.5%. The tax rate is 30%. Find the WACC, using the dividend growth model for the cost of equity.

N = 2 000 000P0 = €13.50book equity = €10 800 000D0 = €1.70g = 2%D = €16 200 000rd = 4.5%T = 30%
WACC = %

Answer key

  1. 1. re = 15.1 %
  2. 2. re = 12.75 %
  3. 3. WACC = 7.255 %
  4. 4. re = 13 %
  5. 5. re = 14.38 %
  6. 6. WACC = 10.46 %

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