ROI calculator (return on investment)
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Result
Calculate the return on investment from what you put in and what you got back. The calculator gives the net gain and the ROI as a percentage, and, if you enter the number of years, the annualised ROI or compound annual growth rate (CAGR), which makes investments of different lengths comparable.
Step-by-step solution
Net gain
ROI
Annualised ROI (compound annual growth rate)
Key formulas
- Return on investment
- ROI = (final value − investment) / investment × 100%
- Annualised ROI
- CAGR = (F/C)1/n − 1
How to calculate ROI
- Net gain = final value − amount invested. Include all income received and all costs paid.
- ROI = net gain / amount invested × 100%.
- Annualised ROI (CAGR) = (final value / amount invested)^(1/years) − 1.
- Compare investments with the annualised figure, not the total ROI, when they run for different periods.
Questions and answers
Why is the annualised ROI not simply the ROI divided by the years?
Because returns compound. 45% over 3 years is 13.2% per year, not 15%: 1.132³ = 1.45.
What does a negative ROI mean?
You got back less than you invested. An ROI of −100% means everything was lost.
Does ROI take the time value of money into account?
No. ROI ignores when the money flows in and out. For projects with cash flows spread over several years, use the NPV and IRR instead.
What should count as the investment?
Every cost needed to get the return: the purchase price, fees, taxes and, for a project, the running costs. Leaving costs out makes the ROI look better than it is.
Practise it yourself
Practise NPV & IRR
A calculator gives the answer. In the exam you need the method: practise it with new problems, hints and worked solutions.