How to Raise money using debt



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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?

3 Answer(s)


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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...

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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%

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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%

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