The New Normal: Cost of Capital in a Higher-Interest-Rate Environment

The following are some highlights of the discussion:

• 1:50—What are some of the global economic trends impacting valuations and cost of capital?
• 5:00—There is so much information out there on historic and projected growth and where the economy is going. Which resources can valuation professionals use for the best information?
• 7:08—What is the U.S. Federal Reserve going to do, and what is the outlook for interest rates and the associated impact on the risk-free rate?
• 11:15–What is the outlook for the equity risk premium? Should we use historical realized ERPs as proxies for the future?
• 16:26—Could Kroll recommend that the U.S. change ERPs in the near future?
• 17:53—Some of the ERP models broke down during COVID-19. Why should you look at multiple models when arriving at your ERP estimate?
• 21:20–Betas in some industries went up in the aftermath of COVID-19 while others went down. Are betas stabilizing now or will they go back to pre-pandemic levels? What were some of the most impacted industries?
• 24:40–How is the cost of debt for individuals and businesses impacted by the current interest rate environment?
• 29:50–Repercussions of higher cost of debt on M&A activity in the current environment and outlook for 2024.