FVC2403. Macroeconomic Update 2024 - Cost of Capital & Valuation Impact

In 2022, major central banks embarked on one of the fastest rate hiking cycles in history in their attempt to control a surge in inflation. Inflation has been coming down rapidly in the U.S. and elsewhere, but has yet to reach the 2.0% central bank target. Market participants are now expecting the U.S. economy will achieve a soft landing, but are split on when will the Fed cut short-term policy rates to a more neutral level. Political uncertainty will also be high, as we approach U.S. Presidential elections. Depending on election promises, a significant increase in the U.S. debt load could place upward pressure on long-term interest rates. Join Carla Nunes and James Harrington (both in Kroll) as they deliver a global economic and financial market update and discuss the related impact on cost of capital assumptions and valuation analyses.

Learning Objectives:

• Analyze the impact of the COVID-19 pandemic and subsequent monetary and fiscal policies and their lasting effect on valuation analyses.
• Determine the adjustments that may be needed to projected growth in cash flows (e.g., long-term growth rates).
• Identify cost of capital inputs in the current environment (e.g., cost of debt, risk-free rate, equity risk premium).