[Retric]

Using 10% for cost of capital for a construction project is ridiculous. Direct loan costs often run at around 6% but can be as low as 4%.

Considering the number of Ghost city's built in China he might have access to even cheaper capital.

[sml0820]

This comment could not be further from the truth, as I feel you do not have strong basis in understanding what the weighted cost of capital refers to.

Here is an example calculation of an infrastructure project:

http://investment.infrastructure.gov.au/publications/reports...

Also, your ghost city comment is irrelevant, which I already addressed in a prior comment.

And as a final point, even with a 6% WACC in an ideal scenario, which I addressed, the NPV is still -3.33 billion.

[Retric]

The most important equation in that was this:

  Dr * (1 – EQ) + Er * EQ 
  Where: Dr = the appropriate return for debt funding invested 
  Er = the appropriate rate for equity funding invested 
  EQ = the proportion of funding invested as equity 

While it does not take into account risk it separates out private equity vs loans. If you get a loan at 6% for 90% of a project's costs and that project returns 6.5% then your private equity return is 6.5% + 9 * .5% = 11%.

Thus, if you can get a vary low interest loan say 2% your private return can be high even if the project barely breaks 2%. Why might he be able to get a loan for 2%, well China might look at having an alternative to the panama cannal in another country as worth a vary low interest loan.

Or far more likely IMO the project might be building more than just a canal as infrastructure projects often make other local investments vary valuable. AKA build a subway and now every apartment within walking distance is suddenly worth significantly more.