-1

Please excuse my lack of knowledge. But I was reading the above text and couldnt understand the following calculation. Will someone be kind enough to explain this to me?? The relevant portion of the text

I am unable to understand how to author arrived at the $365 million figure. I was thinking it should be 25% of $1.114 billion which would come to 27,85,00,000

mhoran_psprep
  • 139,546
  • 15
  • 193
  • 389
noobinvestor
  • 1

1 Answers1

3

Your text says that the investor expects 25% rate of return (e.g. "interest per year"), and that the company is assumed to be worth 1114 million dollar in 5 years.

That means, the investor can invest 365 million dollar, as in 5 years, it is 365 million dollar * 1.25^5 = 1114 million dollar.

Solarflare
  • 2,648
  • 2
  • 9
  • 9