DOCN
DigitalOcean Holdings Inc
Price:  
29.89 
USD
Volume:  
1,975,218.00
United States | IT Services
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DigitalOcean WACC - Weighted Average Cost of Capital

The WACC of DigitalOcean Holdings Inc (DOCN) is 8.7%.

The Cost of Equity of DigitalOcean Holdings Inc (DOCN) is 10.90%.
The Cost of Debt of DigitalOcean Holdings Inc (DOCN) is 5.00%.

Range Selected
Cost of equity 9.30% - 12.50% 10.90%
Tax rate 11.00% - 14.70% 12.85%
Cost of debt 5.00% - 5.00% 5.00%
WACC 7.7% - 9.7% 8.7%
WACC

DigitalOcean WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.19 1.36
Additional risk adjustments 0.0% 0.5%
Cost of equity 9.30% 12.50%
Tax rate 11.00% 14.70%
Debt/Equity ratio 0.5 0.5
Cost of debt 5.00% 5.00%
After-tax WACC 7.7% 9.7%
Selected WACC 8.7%

DigitalOcean'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 DigitalOcean:

cost_of_equity (10.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.19) + 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.