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