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​ = 8%β = ?re​ = 7.1%

Investors require a return of 7.1% on a share. The risk-free rate is 3.5% and the expected market return is 8%. Use CAPM to find the beta β of the share.

re = 7.1%rf = 3.5%rm = 8%
β =
2.Easy
βr (%)SMLrf​ = 1%β = 1rm​ = 6.5%β = 0.6re​ = ?

The risk-free rate is 1%, the expected market return is 6.5% and a share has a beta of 0.6. Use CAPM to find the required return on the share re.

rf = 1%rm = 6.5%β = 0.6
re = %
3.Medium
βr (%)SMLrf​ = 2.5%β = 1rm​ = ?β = 1.6re​ = 9.7%

A share with a beta of 1.6 has a required return of 9.7%. The risk-free rate is 2.5%. What expected market return rm does CAPM imply?

β = 1.6re = 9.7%rf = 2.5%
rm = %
4.Medium
WACC = 6.56%equity€4 000 000re​ = ?debt€5 000 000rd​ = 4%T = 25%

A company has equity worth €4 000 000 and debt worth €5 000 000. Its WACC is 6.56%, its pre-tax cost of debt is 4% and the tax rate is 25%. Find the cost of equity re.

E = €4 000 000D = €5 000 000WACC = 6.56%rd = 4%T = 25%
re = %
5.Hard
WACC = ?equity1 000 000 × €59.50β = 1.2rf​ = 1%, rm​ = 8%debt10 000 × €980rd​ = 4.5%T = 20%

A company has 1 000 000 shares at €59.50 each and 10 000 bonds trading at €980 each. The pre-tax cost of debt is 4.5% and the tax rate is 20%. The share’s beta is 1.2, the risk-free rate 1% and the market return 8%. Find the WACC.

β = 1.2rf = 1%rm = 8%rd = 4.5%T = 20%
WACC = %
6.Hard
rf​ = 2.5%, rm​ − rf​ = 4.5%no debtequityβU​ = 0.8D/E = 1.5equityre​ = ?debtT = 21%

A company's business has an unlevered (asset) beta of 0.8. It plans a debt-to-equity ratio of 1.5. The tax rate is 21%, the risk-free rate is 2.5% and the market risk premium is 4.5%. Find the cost of equity re at the new capital structure.

βU = 0.8D/E = 1.5T = 21%rf = 2.5%rm − rf = 4.5%
re = %

Answer key

  1. 1. β = 0.8
  2. 2. re = 4.3 %
  3. 3. rm = 7 %
  4. 4. re = 11.01 %
  5. 5. WACC = 8.58 %
  6. 6. re = 10.37 %

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