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​ = 8.5%β = ?re​ = 9%

Investors require a return of 9% on a share. The risk-free rate is 3.5% and the expected market return is 8.5%. Use CAPM to find the beta β of the share.

re = 9%rf = 3.5%rm = 8.5%
β =
2.Easy
Dloans€10 000 000I = €500 000tax savingT = 28%interest after tax?rd​·(1 − T) = ?

A company has loans of €10 000 000 on which it pays €500 000 interest per year. The tax rate is 28%. Find the after-tax cost of debt rd·(1 − T) in percent.

D = €10 000 000I = €500 000T = 28%
rd·(1 − T) = %
3.Medium
WACC = ?equity€12 000 000re​ = 12%debt€4 000 000rd​ = 4%T = 21%

A company has equity worth €12 000 000 and debt worth €4 000 000. Its cost of equity is 12%, its pre-tax cost of debt is 4% and the tax rate is 21%. Find the WACC.

E = €12 000 000D = €4 000 000re = 12%rd = 4%T = 21%
WACC = %
4.Medium
WACC = ?equity€2 000 000re​ = 12%debt€5 000 000rd​ = 7%T = 30%

A company has equity worth €2 000 000 and debt worth €5 000 000. Its cost of equity is 12%, its pre-tax cost of debt is 7% and the tax rate is 30%. Find the WACC.

E = €2 000 000D = €5 000 000re = 12%rd = 7%T = 30%
WACC = %
5.Hard
WACC = ?equity5 000 000 × €22.50β = 1.3rf​ = 2.5%, rm​ = 7.5%debt20 000 × €1 000rd​ = 4.5%T = 30%

A company has 5 000 000 shares at €22.50 each and 20 000 bonds trading at €1 000 each. The pre-tax cost of debt is 4.5% and the tax rate is 30%. The share’s beta is 1.3, the risk-free rate 2.5% and the market return 7.5%. Find the WACC.

β = 1.3rf = 2.5%rm = 7.5%rd = 4.5%T = 30%
WACC = %
6.Hard
rf​ = 1.5%, rm​ − rf​ = 5%D/E = 0.5equityβL​ = 1.2debtD/E = 0.6equityre​ = ?debtT = 25.8%

A company's shares have a beta of 1.2 at its current debt-to-equity ratio of 0.5. It plans to raise its debt-to-equity ratio to 0.6. The tax rate is 25.8%, the risk-free rate 1.5% and the market risk premium 5%. Find the cost of equity re after the change.

βL = 1.2D/E1 = 0.5D/E2 = 0.6T = 25.8%rf = 1.5%rm − rf = 5%
re = %

Answer key

  1. 1. β = 1.1
  2. 2. rd·(1 − T) = 3.6 %
  3. 3. WACC = 9.79 %
  4. 4. WACC = 6.929 %
  5. 5. WACC = 8.117 %
  6. 6. re = 7.825 %

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