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 worksheet Practise 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

The risk-free rate is 2%, the expected market return is 7% and a share has a beta of 1.1. Use CAPM to find the required return on the share r_e.

r_f = 2%r_m = 7%β = 1.1

r_e = %

2.Easy

A company's preferred shares pay a fixed dividend of €2.50 per year and trade at €44. The tax rate is 20%. Find the cost of preferred stock r_p.

D_p = €2.50P_p = €44T = 20%

r_p = %

3.Medium

A company has equity worth €8 000 000 and debt worth €3 000 000. Its WACC is 6.43%, its pre-tax cost of debt is 3% and the tax rate is 25.8%. Find the cost of equity r_e.

E = €8 000 000D = €3 000 000WACC = 6.43%r_d = 3%T = 25.8%

r_e = %

4.Medium

A share with a beta of 1.4 has a required return of 12.1%. The risk-free rate is 3%. What expected market return r_m does CAPM imply?

β = 1.4r_e = 12.1%r_f = 3%

r_m = %

5.Hard

A company has 2 500 000 shares at €8.50 each and 5 000 bonds trading at €1 000 each. The pre-tax cost of debt is 6% and the tax rate is 30%. The share’s beta is 0.9, the risk-free rate 1% and the market return 8%. Find the WACC.

β = 0.9r_f = 1%r_m = 8%r_d = 6%T = 30%

WACC = %

6.Hard

A company has 2 500 000 shares at €22.00 each and 10 000 bonds trading at €1 050 each. The pre-tax cost of debt is 4% and the tax rate is 30%. The share’s beta is 1.5, the risk-free rate 1.5% and the market return 8.5%. Find the WACC.

β = 1.5r_f = 1.5%r_m = 8.5%r_d = 4%T = 30%

WACC = %

Answer key

1. r_e = 7.5 %
2. r_p = 5.682 %
3. r_e = 8.006 %
4. r_m = 9.5 %
5. WACC = 6.71 %
6. WACC = 10.53 %

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