How to calculate ROI from an investment?



0
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)


0

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%

0

Click this link to read about the Ultimate Guide to Financial Modelling

Your Answer

Click on this code-snippet-icon icon to add code snippet.

Upload Files (Maximum image file size - 1.5 MB, other file size - 10 MB, total size - not more than 50 MB)

Email
Password