Study examines public vs. private cost of capital

BVWireIssue #181-1
October 4, 2017

Should projects funded with taxpayer money be discounted at a lower rate than privately funded projects? A study contends that a dual discount rate system should be applied to infrastructure projects: (1) a common market discount rate for forecast cash flows independently of the source of financing; and (2) two different discount rates for the calculation of the terminal value depending on public or private financing. The study is by Marian Moszoro, George Mason University Department of Economics.

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