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.

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.

Apr 15 2013 05:29 PM

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%?

Apr 22 2013 01:05 PM
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%

Apr 22 2013 01:14 PM
Then ROI = (180'returns'-50'debt'-25'interest'-50'equity)/50'equity' = 110%