Could you please provide the workings of the following 2 Questions as I couldn't get it right.

1. 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 110% ROI after debt payback? Assume 10% interest on the debt.

2. 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?

1. 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 110% ROI after debt payback? Assume 10% interest on the debt.

2. 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?

May 27 2013 03:15 PM

specially the 2nd question Supriya as it is coming 261% as pr my calculation dont know how 161% is the resuly=t...

pls Mr. Mathews throw some lights in it...

May 27 2013 04:43 PM
pls Mr. Mathews throw some lights in it...

For first question -

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%

May 28 2013 09:35 AM
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%

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)/180=161%

May 28 2013 09:52 AM