1. In his interview, Enrico Dallavecchia commented on a) the changing nature of interconnected risks and the practices designed to manage them during the last 20 years, b) lessons learned from past crises, c) advances and limitations in interconnected risk measurement and d ) the role of data in interconnected risk analytics.
2. The real assets of Basic Co. generate cash flows of $92 million per year. The value of debt is $260 million, the return on debt is 5%, and the coupon rate equals the yield on all debt issues. Interest is paid annually. The tax rate is 35%.
Suppose that the value of the firm is $820 million, the return on equity is 18%, and annual interest payments grow at 1% per year. Calculate the Opportunity Cost of Capital of real assets.