D&P/Kroll survey of cost of capital inputs

BVWireIssue #227-2
August 11, 2021

cost of capital
cost of capital, discount rate, private company valuation, risk analysis, cost of equity, equity risk premium (ERP)

During a recent Duff & Phelps (a Kroll business) webinar, the audience was polled on various valuation and cost of capital topics. One question asked about the sources used for the equity risk premium (ERP) and the majority rely on the D&P recommended U.S. ERP (see below).

Which Methods/Data Sources Do You Use as the Equity (Market) Risk Premium (ERP) Input in Your Cost of Equity Estimates?

Duff & Phelps recommended U.S. ERP57.5%
Long-term historical average31.1%
Professor Aswath Damodaran’s implied ERP23.7%
Supply-side ERP published by D&P22.8%
Other implied ERP sources (e.g., Market-Risk-Premium.com)10.1%
Other/not applicable3.4%
Professor Pablo Fernandez’s survey of ERPs2.3%

This question was multiple choice, and respondents could choose more than one answer. There was a total of 730 respondents to the survey (17% were D&P/Kroll employees, and 83% were external/third-party participants). The full results of the survey are available if you click here.

Carla Nunes and Jim Harrington of D&P/Kroll conducted the webinar COVID-19 One Year Later—Impact on Cost of Capital and Related Valuation Issues and discussed the impact of COVID-19 on global financial markets and cost of capital assumptions one year after the outbreak. A replay of the webinar is available if you click here.

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