The problem there is that the amount of time being wasted is asymmetrical since the employer isn't present, so the typical experience from the candidate's perspective is spending an evening working on a project and then getting no feedback and a canned rejection letter.
Just kidding, but you should value your applicants time. You could just as well show them bad code that is a problem and ask them what they notice when they look at that code. If they are good they point put the problem(s) if they are bad you will probably be able to figure it out based on asking them alone.
