ROI Calculator

ROI (Return on Investment) measures the profitability of an investment. It is calculated as: (Final Value - Initial Investment) / Initial Investment × 100. An ROI of 50% means you earned 50% more than what you invested.

It depends on context. Stock market: 7-10% annually is the historical average. Real estate: 8-12% is considered good. Digital marketing: 300-500% is excellent. Startups: investors look for at least 20-30% annually.

Simple ROI measures total return over the entire period. Annualized ROI normalizes it on a yearly basis, allowing you to compare investments with different durations. Formula: ((1 + ROI/100)^(12/months) - 1) × 100.

The break-even point is when cumulative revenue equals the initial investment. It is calculated as: Initial Investment / Net Monthly Revenue. If you invest $10,000 and earn $2,000/month net, break-even is at 5 months.

Nominal ROI does not account for inflation. To get real ROI, subtract the inflation rate from nominal ROI. Example: nominal ROI 10%, inflation 3%, real ROI ≈ 7%. This calculator shows nominal ROI.

NPV calculates the present value of all future cash flows, discounted at a rate representing the cost of capital. If NPV is positive, the investment creates value; if negative, it destroys value. Formula: NPV = ∑ (Ct / (1+r)^t) where Ct are cash flows and r is the discount rate.

IRR is the discount rate that makes NPV equal to zero. It represents the annualized percentage return of the investment. If IRR exceeds the cost of capital, the investment is worthwhile. IRR is calculated numerically using the Newton-Raphson method.

Payback period shows how many periods it takes to recover the initial investment by summing cash flows. Discounted payback does the same but discounts each flow at the discount rate, giving a more realistic result because it accounts for the time value of money.

The discount rate should reflect the opportunity cost of capital: what you could earn with an alternative investment of similar risk. For SMBs, 8-12% is common. For comparison: US Treasury bonds yield ~4%, the S&P 500 historically returns ~10%, startups require 20-30%.