Raising Debt



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can you please solve this numerical ?
Assume that a project's expected return is $180 million in 5 years for an initial investment of $100 million? How much debt should this project take to get a 10% ROI after debt payback? Assume 10% interest on the debt.

2 Answer(s)


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Manish - The correct question is "how much dent should the project take to get 110% ROI" and not 10%. We fixed this a few days back. Does it still show as 10%?



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So if you invested $100mn (50 equity + 50 debt) and got back $180mn.
Then ROI = (180'returns'-50'debt'-25'interest'-50'equity)/50'equity' = 110%

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