DECEMBER 2018 DISCOUNT RATE UPDATE

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DECEMBER 2018 DISCOUNT RATE UPDATE

January 29, 2019

The overall cost of capital remains stable

Our latest update on how to assess your discount rates identified that:

⬧ Market indices have fallen due to a combination of lower growth expectations and a higher implied equity market risk premium, offset to some extent by a lower risk free rate.

⬧ With a higher market risk premium, the cost of capital for companies in lower beta industries will decrease whereas discount rates for higher beta companies will increase.

⬧ Credit spreads have widened with the overall cost of borrowing increasing (for large businesses in particular).

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If you would like to discuss discount rates, impairment, or any other valuation related matter, please feel free to contact us.

The Leadenhall Team

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