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ROI and operating profit calculation

I'm a little confused on the math here, if the client is wondering whether they should invest $5M , expecting a ROI of 50% over 5 years..what would be the operational profit they need to generate to achieve this? The answer is $12.5 M but I don't get how they arrived at this number. Is ROI formula (Net profit -Investment cost)/Investment cost or Net Profit/Investment cost?

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Top answer
on Jun 27, 2021
#1 Coach for Sessions (4.500+) | 1.500+ 5-Star Reviews | Proven Success: ➡ interviewoffers.com | Ex BCG | 10Y+ Coaching

Hi there,

Given the solution, I assume they mean 50% ROI per year.

If that’s the case, given the ROI should be 50% of the investment, the yearly return needed is going to be 5*0,5=2.5 (given ROI = Net Profit / Investment).

Given the period is 5 years, the total is 2.5*5=$12,5M.

Hope this helps,

Francesco

Deleted user
on Jun 27, 2021

An annual ROI of 50% would be $2.5M per year or $12.5M over the course of 5 years.

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Ian
Coach
on Jun 27, 2021
Top US BCG / MBB Coach - 5,000 sessions |Tech, Platinion, Big 4 | 9/9 personal interviews passed | 95% candidate success

Hi there,

Are you able to link the case? I agree with the other coaches here but if we can get the case it can help us to be sure!

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