3 ms·

This comment could not be further from the truth, as I feel you do not have strong basis in understanding what the weighted cost of capital refers to. Here is

• Retric 12y ago
  The most important equation in that was this: Dr * (1 – EQ) + Er * EQ Where: Dr = the appropriate return for debt funding invested Er = the appropriate rate for equity funding invested EQ = the proportion of funding invested as equity While it does not take into account risk it separates out private equity vs loans. If you get a loan at 6% for 90% of a project's costs and that project returns 6.5% then your private equity return is 6.5% + 9 * .5% = 11%. Thus, if you can get a vary low interest loan say 2% your private return can be high even if the project barely breaks 2%. Why might he be able to get a loan for 2%, well China might look at having an alternative to the panama cannal in another country as worth a vary low interest loan. Or far more likely IMO the project might be building more than just a canal as infrastructure projects often make other local investments vary valuable. AKA build a subway and now every apartment within walking distance is suddenly worth significantly more.