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…9Pp​ = €28€4.50€4.50€4.50…rp​ = ?

A company's preferred shares pay a fixed dividend of €4.50 per year and trade at €28. The tax rate is 25.8%. Find the cost of preferred stock rp.

Dp = €4.50Pp = €28T = 25.8%
rp = %
2.Easy
years0123…9P0​ = €51.00D1​D2​D3​…D0​ = €3.00, g = 2%, re​ = ?

A company has just paid a dividend of €3.00 per share. Dividends are expected to grow by 2% per year forever, and the share price is €51.00. Use the dividend growth model to find the cost of equity re.

D0 = €3.00g = 2%P0 = €51.00
re = %
3.Medium
βr (%)SMLrf​ = 2%β = 1rm​ = ?β = 1.6re​ = 12.4%

A share with a beta of 1.6 has a required return of 12.4%. The risk-free rate is 2%. What expected market return rm does CAPM imply?

β = 1.6re = 12.4%rf = 2%
rm = %
4.Medium
WACC = ?equity€4 000 000re​ = 9%debt€5 000 000rd​ = 4%T = 20%

A company has equity worth €4 000 000 and debt worth €5 000 000. Its cost of equity is 9%, its pre-tax cost of debt is 4% and the tax rate is 20%. Find the WACC.

E = €4 000 000D = €5 000 000re = 9%rd = 4%T = 20%
WACC = %
5.Hard
WACC = ?equity2 500 000 × €13.00β = 1.3rf​ = 1.5%, rm​ = 7%debt40 000 × €980rd​ = 4%T = 28%

A company has 2 500 000 shares at €13.00 each and 40 000 bonds trading at €980 each. The pre-tax cost of debt is 4% and the tax rate is 28%. The share’s beta is 1.3, the risk-free rate 1.5% and the market return 7%. Find the WACC.

β = 1.3rf = 1.5%rm = 7%rd = 4%T = 28%
WACC = %
6.Hard
WACC = ?equity2 500 000 × €41.50β = 1.1rf​ = 1%, rm​ = 7%debt10 000 × €1 050rd​ = 4.5%T = 25%

A company has 2 500 000 shares at €41.50 each and 10 000 bonds trading at €1 050 each. The pre-tax cost of debt is 4.5% and the tax rate is 25%. The share’s beta is 1.1, the risk-free rate 1% and the market return 7%. Find the WACC.

β = 1.1rf = 1%rm = 7%rd = 4.5%T = 25%
WACC = %

Answer key

  1. 1. rp = 16.07 %
  2. 2. re = 8 %
  3. 3. rm = 8.5 %
  4. 4. WACC = 5.778 %
  5. 5. WACC = 5.495 %
  6. 6. WACC = 7.212 %

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