merrills report, page-7

Actually the risk free rate is a very different beast to the opportunity cost which in turn is different to WACC. Zero risk doesn't come into it

The optimial corporate structure to minimise cost of capital is a mix of debt and equity finance. If you were 100% debt financed by a bank as alluded to above, then this gearing level would mean that the interest rate charged by a subordinated lender would be extremely high as there would be a very high risk of default for that lender

A typical unleveraged discount rate for an Australian mining project would about 7-9% real (no cpi component) or say 9.5-11.5% nominal (with cpi)

For an early stage or overseas project (ie Congo) it it common to apply a higher discount rate as a short cut to reflect higher risks. It is technically more correct to include these risks in the cashflows (ie curtailed mine life due to political instability etc) but as it is diffiuclt to capture all these events then dr adjustments are used.