Quote:
Originally Posted by Bingo
But this isn't a facility operation company. It's a group of men worth billions of dollars. They don't enter into 3% returns for their capital. I think 10% is very very conservative as a hurdle, plus I'm applying the same hurdle to the city.
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I'd respectfully disagree that billionaires don't enter 3% returns for investment decisions. HNW individuals typically have a portfolio with a range of risk-weighted assets generating different returns. Their portfolio will almost certainly include fixed income and utilities that return 1%-5% and have (theoretically) lower volatility than higher risk investments.
From what I've seen the city typically uses their actual cost of capital in their financials, which would be 3%-4%. That's if they bother to include a discount rate at all (they've improved in the last administration it seems, but I recall they often would not discount future cash flows at all!)
It seems there are a few on here who are interested in what a lower discount rate does to the calculations, so why not run it just for interests sake? If you've built the model how I expect it's simply changing one number.