DRH
Diamondrock Hospitality Co
Price:  
7.62 
USD
Volume:  
5,083,310.00
United States | Equity Real Estate Investment Trusts (REITs)
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DRH WACC - Weighted Average Cost of Capital

The WACC of Diamondrock Hospitality Co (DRH) is 7.7%.

The Cost of Equity of Diamondrock Hospitality Co (DRH) is 8.95%.
The Cost of Debt of Diamondrock Hospitality Co (DRH) is 6.15%.

Range Selected
Cost of equity 7.90% - 10.00% 8.95%
Tax rate 2.10% - 2.60% 2.35%
Cost of debt 4.80% - 7.50% 6.15%
WACC 6.5% - 8.9% 7.7%
WACC

DRH WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.87 0.92
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.90% 10.00%
Tax rate 2.10% 2.60%
Debt/Equity ratio 0.71 0.71
Cost of debt 4.80% 7.50%
After-tax WACC 6.5% 8.9%
Selected WACC 7.7%

DRH'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 DRH:

cost_of_equity (8.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.87) + 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.