There is a question about calculating ROI based on an intial investment of $200 million out of which $20 million has been financed at 10% interest rate for 5 yrs with an estimated profit of $500 million. Answer should be 150% as per my calculation but it was 61%. Could'nt figure out how we arrived at that number.

Roi
Return On Investment
Interest Expense
Returns
Financial Analyst
Finance Careers
Finance Interview Questions
Finance Job

Aug 24 2012 03:54 PM

Gaurav, the following is the logic-

Initial equity investment is 180 million [200-20(debt)]

Return to the equity investors is 470 million [500 million exit-20 million (to repay the debt)-10 million (to repay the 10% interest for 5 years)

Profit by the equity investors = 290 million (470-180)

ROI = (Return-Investment)/Return = (470-180)/180 = 61%

Aug 25 2012 08:33 PM
Initial equity investment is 180 million [200-20(debt)]

Return to the equity investors is 470 million [500 million exit-20 million (to repay the debt)-10 million (to repay the 10% interest for 5 years)

Profit by the equity investors = 290 million (470-180)

ROI = (Return-Investment)/Return = (470-180)/180 = 61%