Return on equity calculation help please

[cdwrover123]

What is the return on equity as a percentage if 4million was invested by a bank and over 25 years and net income over those 25years totaled £11,503,299. And how did you calculate it? Many thanks to anyone who can help please

[buildersmate]

At the simplest level, if the investment returned £4m over the 25 years, it returned 100% of the original capital after 25 years.
So a return of £11.5m returned 11.5/4 or 287% over the 25 years.
However that only a part of the story because of inflation. You said nothing about inflation but it can't be ignored. The effect of inflation is that a return of x after 25 years is worth less. Accountants have a mechanism to allow for this using a mechanism called 'Discounted Cash Flow' - try Googling if this seems relevant and you want to know more.

[factor-fiction]

It seems cdwrover123 didn't find your response helpful, BM, as he has reposted the question again today!
http://www.theanswerb...e/Question952070.html

[buildersmate]

Yes, I know (sighs deeply). You just can't get the quality of punter on here anymore.