“We do not foresee any material change in the risk-free rate or equity risk premiums,” writes Chris Mellen, a managing director at Valuation Research Corp., in the April issue of Business Valuation Update. The article, which is in Q&A format, is part of a series on impacts of the new tax law on business valuation.
D&P’s view: During a recent webcast, Roger Grabowski and Carla Nunes (both with Duff & Phelps) discussed the impact of the new tax law on the cost of capital. A question from the audience was: Do you expect to increase the D&P recommended U.S. equity risk premium (ERP), which is currently 5.0%, as a result of tax reform? The ERP has “held pretty steady” since the end of 2017, according to Grabowski, who pointed out Duff & Phelps is constantly monitoring it and will let everyone know whether and when there is a change. The other speakers on the webcast were D&P’s Nate Levin and Michelle Johnson, who talked about other valuation implications of the new tax law. To watch a free replay of the webcast, click here.
Extra: Attend a free webinar: Duff & Phelps Cost of Capital Navigator: Q&A with Jim Harrington, on March 29 from 10 a.m.-11:15 a.m. PT
(1 p.m.-2:15 p.m. ET). More details soon on BVR’s Upcoming Training Events page.
Please let us know
if you have any comments about this article or enhancements you would like to see.