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?

Answer given is 61%.

My solution:

Debt= $20 million

Own investment = $180 million

Interest @ 10% for 5 years = $10 million.

Return = 500-20(debt)-10(interest)= $470 million.

ROI= 470/180. This is not equal to 61 %. Please tell me what am I doing wrong.

Answer given is 61%.

My solution:

Debt= $20 million

Own investment = $180 million

Interest @ 10% for 5 years = $10 million.

Return = 500-20(debt)-10(interest)= $470 million.

ROI= 470/180. This is not equal to 61 %. Please tell me what am I doing wrong.

Feb 22 2013 03:11 PM

In this question Debt is 20 million and interest 10% so after 5 year you have to return 30 million....if expected return after 5 years is 500 million then left over is 470 million and your investment is 180 million so ROI = 470/180=261%

Mar 05 2013 10:16 PM