Solid Confusion regarding the Question asked in Quiz


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If this is the question you are reffing to.. then
"If you took $20 million as debt to fund a $200 million project. Assuming 10% interest on the debt and returns of $500 million in 5 years. What is your ROI?"

SOLUTION - In this case you should subtract the amount of debt from the total investment needed. Then you should pay back the bank loan and interest from the returns and calculate the ROI of the equity invested (minus the debt) to the total $500 million of the project.

After 5 years, with 10% interest on 20 million, you owe 30 million to bank.
subtract this from total return of 500 million to get actual return of 470 million.

Initial investment was 180 millions(200-20)
So total profit = 470 - 180 = 290 millions = 290/180 = 161%