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…9P0​ = €93.00D1​D2​D3​…D0​ = €3.50, g = 6%, re​ = ?

A company has just paid a dividend of €3.50 per share. Dividends are expected to grow by 6% per year forever, and the share price is €93.00. Use the dividend growth model to find the cost of equity re.

D0 = €3.50g = 6%P0 = €93.00
re = %
2.Easy
βr (%)SMLrf​ = 3%β = 1rm​ = 10%β = ?re​ = 11.75%

Investors require a return of 11.75% on a share. The risk-free rate is 3% and the expected market return is 10%. Use CAPM to find the beta β of the share.

re = 11.75%rf = 3%rm = 10%
β =
3.Medium
WACC = 9.38%equity€8 000 000re​ = ?debt€5 000 000rd​ = 5%T = 28%

A company has equity worth €8 000 000 and debt worth €5 000 000. Its WACC is 9.38%, its pre-tax cost of debt is 5% and the tax rate is 28%. Find the cost of equity re.

E = €8 000 000D = €5 000 000WACC = 9.38%rd = 5%T = 28%
re = %
4.Medium
βr (%)SMLrf​ = 3%β = 1rm​ = ?β = 1.5re​ = 11.25%

A share with a beta of 1.5 has a required return of 11.25%. The risk-free rate is 3%. What expected market return rm does CAPM imply?

β = 1.5re = 11.25%rf = 3%
rm = %
5.Hard
WACC = ?equity5 000 000 × €12.00β = 1.1rf​ = 1.5%, rm​ = 6%debt5 000 × €1 050rd​ = 6%T = 30%

A company has 5 000 000 shares at €12.00 each and 5 000 bonds trading at €1 050 each. The pre-tax cost of debt is 6% and the tax rate is 30%. The share’s beta is 1.1, the risk-free rate 1.5% and the market return 6%. Find the WACC.

β = 1.1rf = 1.5%rm = 6%rd = 6%T = 30%
WACC = %
6.Hard
WACC = ?equity4 000 000 × €57.50β = 0.9rf​ = 2%, rm​ = 7%debt5 000 × €1 020rd​ = 5%T = 30%

A company has 4 000 000 shares at €57.50 each and 5 000 bonds trading at €1 020 each. The pre-tax cost of debt is 5% and the tax rate is 30%. The share’s beta is 0.9, the risk-free rate 2% and the market return 7%. Find the WACC.

β = 0.9rf = 2%rm = 7%rd = 5%T = 30%
WACC = %

Answer key

  1. 1. re = 9.989 %
  2. 2. β = 1.25
  3. 3. re = 12.99 %
  4. 4. rm = 8.5 %
  5. 5. WACC = 6.269 %
  6. 6. WACC = 6.435 %

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