10% discount rate, $2.2b npv , page-20

vlad86. Thank you for your input.

I agree with all your points except for the comment of the cost of capital where you say equity is cheaper than debt. I work in corporate finance and we advise on capital structures every day. In corporate finance, we have a concept known as the 'Pecking Order' theory in regards to the cost of capital which suggest that capital should be firstly employed internally from existing funds because of its the cheapest form. Secondly, debt is then the preferred source as it is tax deductible. Therefore the cost of debt after tax (KdAt in corporate finance lanugaute) is actually 30% less. Also, it has the benefit of retaining profits internally. Third and finally in the Pecking Order is the most expensive, being the cost of equity (Ke) because of the risk. I.e. as shareholders, we expect a higher rate of return to compensate us for the risk of being last in the rank as creditors if a company goes broke and among other things equity markets are more volatile than debt markets. If equity was cheaper than debt instruments, then this means we as equity holders would demand a lesser required rate of return than bond holders and other debt instruments (which mean bonds have a higher return than equities- i.e. shares- which is not true). If this is true, then you would theoretically gain a better return by investing in bonds or cash deposits where banks can use your money to fund loans (debt). This is not true, however, as bonds and cash deposits are less risky! Hence, equity capital (shareholders' funds) is more expensive.

Wiki actually expains it simply: http://en.wikipedia.org/wiki/Pecking_Order_Theory

American Capital also explains it nicely: http://www.americancapital.com/resources/uses_of_financing/acquisition_financing/basics/basics.html

Have a read of the two becasue it makes simple sense.

I enjoyed reading your views on the project in general and you're point that there may not have been much consideration about the future funding structure is a great point. because it's not WP's job to quantify the discoutn rate according to FMS's management decision about the funding structure.

Either way, you're also correct about the positive NPV being a big upside to shareholders!

Thank you for your discussion.