ACCA FM WACC Questions: 4 Calculation Mistakes to Fix Before June 2026
WACC appears in almost every FM Section C exam. And the December 2025 examiner report confirms that candidates are dropping marks on the same four errors, sitting after sitting. Fix them now, before you sit in June.
Why WACC Matters So Much in FM
Section C of FM typically contains two 20-mark constructed-response questions. WACC — or a question built around the cost of capital — appears in one of them more often than not. That's up to 20 marks sitting there, and the examiner has been explicit: the errors are not obscure. They're basic, repeatable, and avoidable.
The FM pass rate for December 2025 was 48%. WACC questions are a major reason candidates fall short. Not because the topic is hard in theory — but because under time pressure, predictable errors creep in.
The 4 Mistakes the Examiner Keeps Flagging
Mistake 1: Using Book Values Instead of Market Values
The most common error of all. WACC uses market value weights, not book values from the statement of financial position.
Wrong: Using the nominal value of shares (e.g. $0.50 per share) as the equity component.
Right: Market value of equity = current share price × number of shares in issue.
If a question gives you a share price of $3.20 and 5 million shares, equity market value is $16m — not the $2.5m you'd get using 50p nominal value. Using the wrong figure distorts every weighting that follows.
Mistake 2: Including Reserves as a Separate Source of Finance
The December 2025 examiner report was direct on this: reserves are not a separate component in the WACC calculation. Reserves are part of shareholders' equity — they're already captured in the equity market value once you multiply share price by shares in issue.
Wrong: Creating a three-way split of equity, reserves, and debt in your weighting calculation.
Right: Two components only — total equity market value (Ve) and total debt market value (Vd).
Mistake 3: Applying (1 − t) to the Cost of Equity
The tax shield on interest applies to debt only. Equity dividends are paid from post-tax profits — there is no tax relief to adjust for.
The correct WACC formula is:
WACC = [Ve ÷ (Ve + Vd)] × Ke + [Vd ÷ (Ve + Vd)] × Kd × (1 − t)
The (1 − t) sits only against Kd. Candidates who apply it to Ke understate the cost of equity and produce an artificially low WACC figure — dropping marks on both the calculation and any discussion of the result.
Mistake 4: Using the Wrong Cost of Equity Model
FM tests two models for cost of equity: the Dividend Growth Model (DGM) and CAPM. If the question specifies one, use that one — even if you find the other easier. Using the wrong model earns zero marks for the calculation, regardless of how correctly you execute it.
DGM: Ke = [D₀ × (1 + g) ÷ P₀] + g — use when given dividend, growth rate, and ex-div share price.
CAPM: Ke = Rf + β(Rm − Rf) — use when given risk-free rate, beta, and market return.
If the question says "using CAPM, calculate the cost of equity," CAPM is the answer. Full stop.
Worked Example: Wrong vs Right
A company has 4 million shares in issue, trading at $2.50. Nominal value is $0.50. Retained earnings are $3m. Irredeemable debt has a market value of $5m, coupon 6%, tax rate 25%.
Wrong approach (common exam error):
Equity (nominal): 4m × $0.50 = $2m
Reserves: $3m
Debt: $5m
Total: $10m — distorted weights, debt overstated
Right approach:
Ve = 4m × $2.50 = $10m
Vd = $5m
Total = $15m
Weight of equity = 10/15 = 66.7%; weight of debt = 5/15 = 33.3%
Kd (post-tax) = 6% × (1 − 0.25) = 4.5%
WACC = (66.7% × Ke) + (33.3% × 4.5%)
What to Do Before June
First, attempt at least three full FM Section C questions from the ACCA practice platform under exam conditions — don't just read model answers. Second, before every WACC calculation, write down "market values only" and "tax on debt only" as a two-second self-check. Third, confirm which cost of equity model is specified in the question before you write a single number.
These four errors account for a disproportionate share of marks lost in FM. The global pass rate is 48% — candidates who pass are typically not smarter, they just don't make these mistakes.