Cost of Capital in theCurrent Environment
COVID-19 Update
December 2021

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In this publication, you will find that sources and references that were previously noted as Duff & Phelps or Duff & Phelps, A
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“Global economic recovery is continuing at a robust
but uneven pace. Global supply disruptions andregional labor shortages are creating significant
inflationary pressures, which combined with aresurgence in COVID-19 cases, are contributing tofurther downward revisions in real GDP growth.
Financial market risk has risen recently due to a
new COVID-19 variant, but the longer-term
impact of Omicron is still a wild card.
Carla S. Nunes, CFAManaging Director, Kroll”

Global Cost of Capital Inputs

Data as of November 30, 2021

Kroll-Recommended
Equity Risk Premium
These are our latest Equity Risk Premium (ERP)
recommendations for the U.S. and the Eurozone(from a German investor perspective), along withaccompanying normalized risk-free rates. ERPs arestill higher relative to our recommendations prior tothe outbreak of COVID-19 in March 2020.

Eurozone*(in EUR)

United States(in USD)

Normalized
Risk-free Rate

*German normalized risk-free rate and Eurozone Equity Risk Premium (ERP) for use in EUR-denominated discount rates from a German investor perspective. Additionalcountry risk adjustments may be warranted when estimating discount rates for other countries in the Eurozone.

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Total Assets Held byMajor Central Banks Over Time

Data as of November 30, 2021

After COVID-19 was declared a pandemic, major central banks implemented quantitative easing (QE) policies that entailed
massive purchases of securities at an unprecedented pace. The swelling size of their balance sheets, which are comprised
primarily of government debt securities, has contributed to keeping interest rates at historically low levels in most developed
markets, despite recent inflationary pressures.

Sources: Capital IQ, FRED® Economic Data, Bank of England, Bank of Japan, European Central Bank
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Global 10-Year Government Bond Yields

Data as of November 30, 2021

Long-term interest rates are still at historically low levels in developed markets, as central bank policies continue to exert somedownward pressure on yields. The recent surge in inflation, partly due to global supply chain disruptions, is starting to have animpact in emerging markets. Brazilian 10-year yields have seen a significant increase from 2020, at the height of the pandemic.

Sources: Bloomberg (Brazil, India), European Central Bank (Eurozone aggregate yield), Capital IQ (other countries)
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6Stock Market Performance
Since the Wuhan Lockdown*
Data as of November 30, 2021

The United States has emerged as the market with the best performance and fastest recovery from the pandemic, relative toother major stock markets across the globe.

Source: Capital IQ*The first lockdown due to COVID-19 began on January 23, 2020, in Wuhan, China.
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Global Market Volatility

Data as of November 30, 2021

U.S. and European financial markets have experienced some recent volatility due to increased uncertainty related to the impactof inflationary pressures on central banks’ plans to raise interest rates and a surge in COVID-19 cases.

Sources: Capital IQ, FRED® Economic Data, Morningstar Direct
U.S. corporate credit spreads are based on the difference in effective yields between the ICE BofA U.S. High Yield Index and the ICE BofA U.S. Corporate Index. Eurodenominated corporate credit spreads are based on the difference in effective yields between the Bloomberg Barclays Pan-European High Yield Index (EUR) and theBloomberg Barclays Euro Aggregate Corporate Bond Index. Long-term averages are based on 1995 to present for VIX daily series, 1999 to present for VSTOXX dailyseries, 1996 to present for U.S. credit spread daily series, and 1998 to present for EUR-denominated credit spread monthly series.
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Global Credit Spreads

Data as of November 30, 2021

Thanks to the inclusion of corporate debt in the Federal Reserve Bank (Fed) and European Central Bank (ECB) asset purchaseprograms, as well as investor perception that these central banks will act as a lender of last resort, U.S. and European corporate
debt spreads between high-yield and investment-grade bonds are at historical lows.

Sources: Capital IQ, FRED® Economic Data, Morningstar Direct
U.S. corporate credit spreads are based on the difference in effective yields between the ICE BofA U.S. High Yield Index and the ICE BofA U.S. Corporate Index. Eurodenominated corporate credit spreads are based on the difference in effective yields between the Bloomberg Barclays Pan-European High Yield Index (EUR) and theBloomberg Barclays Euro Aggregate Corporate Bond Index. Long-term averages are based on 1995 to present for VIX daily series, 1999 to present for VSTOXX dailyseries, 1996 to present for U.S. credit spread daily series, and 1998 to present for EUR-denominated credit spread monthly series.
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9Real GDP Growth –Q1, Q2 and Q3 2021

Data as of November 30, 2021
Economic recovery from the pandemic in 2021 appears strongest in the United States, despite a slowdown in Q3.
Japan’s economy continues to oscillate between growth and contraction (in real terms).

Sources: FRED® Economic Data (Eurozone, Japan, U.S.), National Bureau of Statistics of China, UK's Office for National Statistics
Quarter-on-quarter growth based on the growth rate from Q4 2020 to Q1 2021, Q1 2021 to Q2 2021, and Q2 2021 to Q3 2021. This rate is annualized by computing thecompounded growth rate for four quarters as follows: (1 + Real GDP Q/Q Growth)^4. The annualized rate shows what the quarterly change would be if it lasted a full year.
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10Real GDP Growth (%) Estimates (Median)
Data as of December 1, 2021

Global economic recovery from the pandemic continues at a robust, but uneven pace. Economic growth projections for 2021
and 2022 have been revised slightly down relative to September. Global supply chain disruptions, inflationary pressures, and a
resurgence of COVID-19 cases in some pockets of the world are adding uncertainty.

Note: Before COVID-19 median estimates are basedon data released in December 2019 and early Januaryof 2020. After COVID-19 median estimates are basedon data available as of the date noted above.
Compound annual growth rate (CAGR) is calculated as
the annualized rate of return of median real GDP
growth rate estimates from the end of 2019 throughthe end of 2021: [(1 + 2020 Real GDP Growth Rate) *( 1 + 2021 Real GDP Growth Rate ) ] ^ (1/2) – 1.
Cumulative growth is calculated as the total(cumulative) growth rates of median real GDP
estimates from the end of 2019 through the end of2021: (1 + 2020 Real GDP Growth Rate ) * ( 1 + 2021Real GDP Growth Rate ) – 1. These metrics show theannualized and cumulative real GDP growth rates thatwere expected at the end of 2019 (Before COVID- 19)
for the 2020–2021 period vs. what the expectations
are currently (After COVID-19).

Sources: OECD, International Monetary Fund, World Bank, Blue Chip Economic Indicators, Consensus Economics, Economic Intelligence Unit, Fitch Ratings, IHS Markit, Moody'sAnalytics, Oxford Economics, S&P Global Ratings
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11Real GDP Growth (%) Estimates (Median)
Data as of December 1, 2021

Growth expectations for 2021 have been downgraded, as a resurgence of COVID-19 cases related to the Delta-variant, global
supply chain disruptions, and labor shortages have contributed to a slowdown in third-quarter economic activity.

Note: Before COVID-19 median estimates are basedon data released in December 2019 and early Januaryof 2020. After COVID-19 median estimates are basedon data available as of the date noted above.
Compound annual growth rate (CAGR) is calculated as
the annualized rate of return of median real GDP
growth rate estimates from the end of 2019 throughthe end of 2021: [(1 + 2020 Real GDP Growth Rate) *( 1 + 2021 Real GDP Growth Rate ) ] ^ (1/2) – 1.
Cumulative growth is calculated as the total(cumulative) growth rates of median real GDP
estimates from the end of 2019 through the end of2021: (1 + 2020 Real GDP Growth Rate ) * ( 1 + 2021
Real GDP Growth Rate ) – 1. These metrics show theannualized and cumulative real GDP growth rates thatwere expected at the end of 2019 (Before COVID- 19)for the 2020–2021 period vs. what the expectations
are currently (After COVID-19).

Sources: OECD, International Monetary Fund, World Bank, Blue Chip Economic Indicators, Consensus Economics, Economic Intelligence Unit, Fitch Ratings, IHS Markit, Moody'sAnalytics, Oxford Economics, S&P Global Ratings
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12Real GDP Growth (%) Estimates (Median)
Data as of December 1, 2021

The outlook for 2021 real GDP growth has improved for the Eurozone (since the September 2021 update), but it is not enoughto outweigh the economic contraction observed in 2020. The impact of the Omicron variant of COVID-19 may have a negative
impact on the 2022 projections.

Note: Before COVID-19 median estimates are basedon data released in December 2019 and early Januaryof 2020. After COVID-19 median estimates are basedon data available as of the date noted above.
Compound annual growth rate (CAGR) is calculated as
the annualized rate of return of median real GDP
growth rate estimates from the end of 2019 throughthe end of 2021: [(1 + 2020 Real GDP Growth Rate) *( 1 + 2021 Real GDP Growth Rate ) ] ^ (1/2) – 1.
Cumulative growth is calculated as the total(cumulative) growth rates of median real GDPestimates from the end of 2019 through the end of2021: (1 + 2020 Real GDP Growth Rate ) * ( 1 + 2021
Real GDP Growth Rate ) – 1. These metrics show theannualized and cumulative real GDP growth rates thatwere expected at the end of 2019 (Before COVID- 19)
for the 2020–2021 period vs. what the expectations
are currently (After COVID-19).

Sources: OECD, International Monetary Fund, World Bank, Blue Chip Economic Indicators, Consensus Economics, Economic Intelligence Unit, Fitch Ratings, IHS Markit, Moody'sAnalytics, Oxford Economics, S&P Global Ratings
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13Real GDP Growth (%) Estimates (Median)
Data as of December 1, 2021

While still strong, China’s real GDP growth estimates for 2021 and 2022 have been downgraded by economists, relative to
September 2021 projections.

Note: Before COVID-19 median estimates are basedon data released in December 2019 and early Januaryof 2020. After COVID-19 median estimates are basedon data available as of the date noted above.
Compound annual growth rate (CAGR) is calculated as
the annualized rate of return of median real GDPgrowth rate estimates from the end of 2019 throughthe end of 2021: [(1 + 2020 Real GDP Growth Rate) *( 1 + 2021 Real GDP Growth Rate ) ] ^ (1/2) – 1.
Cumulative growth is calculated as the total(cumulative) growth rates of median real GDPestimates from the end of 2019 through the end of2021: (1 + 2020 Real GDP Growth Rate ) * ( 1 + 2021
Real GDP Growth Rate ) – 1. These metrics show theannualized and cumulative real GDP growth rates thatwere expected at the end of 2019 (Before COVID- 19)
for the 2020–2021 period vs. what the expectations
are currently (After COVID-19).

Sources: OECD, International Monetary Fund, World Bank, Blue Chip Economic Indicators, Consensus Economics, Economic Intelligence Unit, Fitch Ratings, IHS Markit, Moody'sAnalytics, Oxford Economics, S&P Global Ratings
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14U.S. vs. Eurozone Unemployment Rate

Data as of November 30, 2021

The U.S. unemployment rate is now lower than in March 2020, the time when COVID-19 was declared a pandemic. The U.S. iscurrently seeing pockets of labor shortages in a variety of industries. The Eurozone’s unemployment rate is close, but still higher
than the level registered in March 2020.

Source: U.S. Bureau of Labor Statistics, Eurostat* Data through November 2021 for the United States and October 2021 for the Eurozone.
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15U.S. and Eurozone
Consumer Sentiment vs. Business Confidence
Data as of November 30, 2021

Consumer sentiment declined dramatically in the U.S., with a rise in inflation and a surge in COVID-19 cases are creating someanxiety about the future. In contrast, business confidence in the U.S. and Eurozone is now higher than prior to the pandemic.

Sources: Michigan University’s Index of Consumer Sentiment, OECD’s Business Confidence Index, European Commission business and consumer surveys [The samemethodology that the European Commission uses to standardize its Economic Sentiment Indicator (ESI) was applied to the Eurozone Consumer Confidence andBusiness Climate Indicator series.]
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For more information, please contact:

Carla S. Nunes, CFA

Kevin Madden

carla.nunes@kroll.com

kevin.madden@kroll.com

Managing Director
Valuation Digital Solutions
Kroll, LLC

Director
Valuation Digital Solutions
Kroll, LLC

Ab o u t Va l u a t io n D i g i t al So l u t i o ns
The Valuation Digital Solutions group within Kroll strives to empower companies and finance professionals with cost of capital thought leadership and high-quality valuation data thatenables them to make sound business decisions. Key data and content essential in the quantification of risk can be found in the Cost of Capital Navigator digital platform. For more
information visit: www.kroll.com/costofcapitalnavigator.
Ab o u t K r o l l
Kroll is the world’s premier provider of services and digital products related to valuation, governance, risk and transparency. We work with clients across diverse sectors in the areas ofvaluation, expert services, investigations, cyber security, corporate finance, restructuring, legal and business solutions, data analytics and regulatory compliance. Our firm has nearly
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