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Cost of Capital (CoC)

22 bytes added, 23:13, 12 January 2013
→‎Examples
Even subsidised loans with interest rates lower than 1% can lead to significant annual expenditures on cost of capital if there is a large loan and a long repayment period as shown by the example of Franceys, Naafs, Pezon and Fonseca, 2011;
:::<font size="1">A governmental body borrows US$ 22 million from a development bank to improve the water and sanitation situation for around a million people. The loan was for a 50 year period. It was agreed that for the first 10 years, from 2013 to 2023, no repayment of principal would take place.</font>
The development bank charged a fee of 0.5% per year for money that had been allocated and reserved but not yet used (known as a commitment charge ) and 0.75% in interest for the money that the project was already spending. The repayment of the principal, starting in year 10, is 1% for 10 years and 3% over the final 30 years.
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