The Southern Guru Copper Company operates a large mine in a South American country. A National Assembly said in a speech that most of the capital for the mining operation was provided by loans from the Word Bank; in fact, Southern Guru has only $500,000 of its own money actually invested in the property. The cash flow for the mine is:

Year                                     Cash Flow

0....................$0.5 million investment

1....................3.5 million profit

2....................0.9 million profit

3....................3.9 million profit

4....................8.6 million profit

5....................4.3 million profit

6....................3.1 million profit

7....................6.1 million profit

The legislator divided the $30.4 million total profit by the $0.5 million investment. This produced, he said, a 6080% rate of return on the investment. Southern Guru claims the actual rate of return is much lower. They ask you to compute their rate of return.