32 had the situation continued the public interest

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Unformatted text preview: ull 35 percent less than the lowest cost a private entity could hope to obtain.25 Other academic studies confirm these consistently higher private capital costs.26 And since the recession it has become relatively more expensive for the private sector to borrow capital compared with the public, with U.S. government debt remaining at near rock-bottom interest rates. Because government officials can issue tax-free bonds and bond traders are willing to accept lower interest rates on public bonds, deals based on private capital are inherently more expensive than public financing. When investors purchase stocks or other forms of equity in private infrastructure companies, they take on greater risk than if they purchase private infrastructure bonds; therefore, they expect even higher rates of return. Thus, regardless of whether private companies raise capital through debt or equity, their costs will be higher than public financing. Another key credit-related risk of PPPs is the possibility that the cost of...
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This note was uploaded on 11/30/2013 for the course PHILOSOPHY 303m taught by Professor Tye during the Fall '12 term at University of Texas.

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