Hi Binny

How to raise money using debt

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?

Total Investment = 200

Investment = 200-20= 180

Debt= 20

Interest = 10%

Years= 5

Return= 500

Debt + Interest for 5 years = 20 + 10 = 30

Returns - Debt payable = 500-30 =470

ROI= 470/180 = 261%

But the answer is 61%

Please correct me if I am wrong.

How to raise money using debt

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?

Total Investment = 200

Investment = 200-20= 180

Debt= 20

Interest = 10%

Years= 5

Return= 500

Debt + Interest for 5 years = 20 + 10 = 30

Returns - Debt payable = 500-30 =470

ROI= 470/180 = 261%

But the answer is 61%

Please correct me if I am wrong.

Oct 19 2012 07:06 AM

Kaushik, the ROI formula is (Return - Investment)/Investment = (470-180)/180 = 161%

The correct answer should be 161%. We will fix that answer choice.

Oct 23 2012 06:39 PM
The correct answer should be 161%. We will fix that answer choice.