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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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