Cost Calculator AI
Business & StartupCapital Efficiency

Return on Investment (ROI) Calculator

Calculate net profit return on capital investments, total ROI percentage, annualized compound annual growth rate (CAGR), and capital multiples.

Capital Outlay & Returns Horizon

Return on Investment (ROI) Formulas

Total ROI % = ((Final Value - Initial Cost) / Initial Cost) × 100; Annualized ROI (CAGR) % = ((Final / Initial)^(1 / Years) - 1) × 100
  • Net Profit Gain: Total cash distributions and ending asset value minus initial capital invested.
  • Annualized ROI (CAGR): Compounded annual rate of return, normalizing returns across multi-year holding periods.

Step-by-Step Worked Example

Scenario: Investing $50,000 into equipment upgrades that returns $80,000 over a 2-year holding period

Calculation Steps:

  1. Net Profit Gain = $80,000 - $50,000 = $30,000
  2. Total ROI % = ($30,000 / $50,000) × 100 = 60.0%
  3. Investment Multiplier = $80,000 / $50,000 = 1.60x
  4. Annualized ROI (CAGR) = (($80,000 / $50,000)^(1 / 2) - 1) × 100 = 26.5% / year
Result: The investment generates a 60.0% total ROI ($30,000 net profit, 1.60x multiplier), compounding at 26.5% per year.

How to Use This Calculator

  1. 1Enter the initial cash capital invested.
  2. 2Input final liquidation value or cumulative cash returns generated.
  3. 3Specify the investment duration in years to see annualized CAGR.

Assumptions & Limitations

  • Returns are net of maintenance and direct operational expenses.
  • Calculations exclude inflation adjustments unless entered in constant dollars.

Frequently Asked Questions

Why is annualized ROI better than total ROI for comparing projects?

A 50% total ROI earned over 1 year is extraordinary (50%/yr), whereas a 50% total ROI earned over 10 years is modest (~4.1%/yr). Annualized CAGR normalizes time differences.

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