10% discount rate, $2.2b npv , page-5

It is true that the majors are using a discoutn rate of approximately 10%, but that's attributable to two factors:

1. Less risk
2. The majors' capital structures incorporate debt which produces a less weighted average cost of capital (WACC).

FMS, on the other hand, do not have any debt, so 100% of their cost of capital is attributable to the cost of equity, which is unheard of at 10%.

jcoulter... regarding the $25b, that refers to future revenue, not enterprise value. This basically means that the $25b future revenues have been discounted at a discount rate of 10% to derive an NPV of $2.2b. In effect, this means that this particular project is worth/valued at $2.2b, not $25b (not enterprise value, but "project value"). I.e. the value of the $25b revenues over 20 years (less operating expenses) is valued at $2.2b in todays dollar terms when discoutned at a rate of 10%.

With a higher discount rate, the NPV would be less than $2.2b. Hence, it can be suggested that $2.2b is an over valued NPV becaue a discoutn rate of 10% is unheard of with a capital structure comprising of 100% equity and 0% debt.