Based on its debt and interest expense, VW's current cost of capital it might be as low as 2% but whether it could borrow that cheaply again seems questionable. Were it to borrow the €200b at 3%, it would cost the company about €6b in additional interest payments, which would take a big chunk out of its €15b before-tax earnings. That would be about a 40% reduction, not inconsistent with the 30% fall in the company's share price after the scandal broke this week.
However, it may face fines which could run into billions, and that assumes sales remain at their 2014 levels which is unlikely. Already Switzerland has banned sales of VW cars; granted Switzerland isn't a huge market but if other counties follow suit, that combined with the loss of brand image, worldwide sales might easily fall 15%. That would reduce its pre-tax profit to €11.5b. After the additional interest burden, that leaves €5.5b, or 37% of current EBT. While VW will probably survive, I expect the shares to fall much further, probably halving in value from there they are now (€128 per share) to around €70.
As I recall, diesel cars are a fairly recent phenomenon in the US. In Europe they were more popular, and become more main-stream in Britain in the 1980s and the US in the 2000s. Their popularity was fuelled in part by rising petrol prices which made their low fuel consumption an attractive feature. But they had to overcome significant barriers including higher noise levels, and the perception as being much more polluting than gas engines. While noise levels, particularly in the cabin, have been fixed with engineering improvements, the emission of pollutants, it appears, had not.
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