Please help in calculating ROI?

Question

Data:
Total Area: 50000 Sq.M
Construction Cost: $25Mn 
Construction Period: 2 Years
Financing: Equity (30%), Debt (70%)
Loan terms: interest - 10% p.a., Term - 3 years (from the date of construction)

The developer wants to sell the property in the first year of operation at a rate of $2500 per Sq.M. What will be ROI after servicing the debt?

Please help in calculating ROI

Jon Holdman · Answer

I don't think there's enough information.

This developer is going to sell for $125 million.  They borrow $25 million for construction.  They pay $2.5 million in interest.  After selling, they pay off the $25 million, netting $100 million.  Less the $2.5 million in interest, leaves $97.5 million.  Divided by the $2.5 million they invested (the interest payment seems to be their only outlay), that's a 3900% ROI.

I think there's a lot left out.  Rather than try to ask specific questions to ferret out the missing info, let me tell you now to compute ROI.  Its dead simple.

ROI = return / investment.

Whats the total return, after paying off all loans and all the cash spent on the deal?

What's the total cash put out to do the deal?

Its not at all complicated.

REJI V · Answer

Dear Expert,
Thanks for the reply. The developer wants to hold th eproperty for the fist year only and his objective is to develop nad sell immediatly as possible. the expense is assumed asrecovered from the sale value.

Please help this as a hypothetical example

Michael Shadow · Answer

Rejia,

You need some more information.  How long are you planning on holding the property.  What are the expenses associated with the property.  What if the contractor can not get the property sold in time?

Also tell us a little more about yourself so we know who you are and what you are looking to do.  Then we can help you more.

-Michael