US BV News
Inflation appears to have peaked, per Kroll
The latest cost of capital infographic from Kroll says that inflation seems to have topped out toward the end of 2022. Inflation estimates over the long term rose from 2.0% in June 2020 to 2.9% in October 2022 but declined to 2.4% at the end of December 2022. Long-term inflation expectations are a key starting point to evaluate the long-term growth rate used in the terminal year for a DCF analysis.
Cost of capital inputs: The same infographic says that, as of Jan. 17, 2023, Kroll’s recommended U.S. equity risk premium (ERP) is 6.0% and the normalized risk-free rate is the higher of 3.5% or the spot 20-year U.S. Treasury yield as of the valuation date. This guidance is effective when developing USD-denominated discount rates as of June 15, 2022, and thereafter
You can find the latest cost of capital infographic at https://www.kroll.com/-/media/kroll-images/pdfs/cost-of-capital-infographic-jan-2023.pdf