Dropbox WACC - Weighted Average Cost of Capital
The WACC of Dropbox Inc (DBX) is 8.6%.
| Range | Selected | |
| Cost of equity | 8.7% - 11.6% | 10.15% |
| Tax rate | 11.8% - 14.6% | 13.2% |
| Cost of debt | 4.0% - 4.5% | 4.25% |
| WACC | 7.4% - 9.7% | 8.6% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.04 | 1.19 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.7% | 11.6% |
| Tax rate | 11.8% | 14.6% |
| Debt/Equity ratio | 0.32 | 0.32 |
| Cost of debt | 4.0% | 4.5% |
| After-tax WACC | 7.4% | 9.7% |
| Selected WACC | 8.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| DBX | Dropbox Inc | 0.32 | 0.88 | 0.69 |
| AVLR | Avalara Inc | 1.73 | 0.98 | 0.39 |
| CDK | CDK Global Inc | 0.25 | 0.96 | 0.79 |
| FIVN | Five9 Inc | 0.59 | 1.57 | 1.04 |
| GWRE | Guidewire Software Inc | 0.02 | 0.88 | 0.86 |
| NUAN | Nuance Communications Inc | 0.05 | 1.11 | 1.06 |
| PEGA | Pegasystems Inc | 0.06 | 1.28 | 1.22 |
| PTC | PTC Inc | 0.09 | 1.08 | 1 |
| RP | RealPage Inc | 0.14 | 1.14 | 1.02 |
| ZEN | Zendesk Inc | 0.13 | 0.87 | 0.79 |
| Low | High | |
| Unlevered beta | 0.83 | 1.01 |
| Relevered beta | 1.06 | 1.28 |
| Adjusted relevered beta | 1.04 | 1.19 |
Dropbox's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for Dropbox:
cost_of_equity (10.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.04) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.