How to calculate ROI from an investment?

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.

2 Answer(s)


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%


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