As previously mentioned, it is argued that the optimum level of debt and equity will exist when the capital structure "balances the risk of bankruptcy with the tax savings of debt". The risk with having too much debt is that a project with fluctuating cash flow may be forced into default if the debt covenants are not met, even though the project may still be financial profitable and cash flow positive. Furthermore, project sponsors should maintain some flexibility in case unforeseen situations, such as construction delays and labour unrest, require additional financing.
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25 See Glossary