ROI CALCULATOR
ROI
Total Gain on Investment
Rs. 0
Return on Investment (ROI)
0 %
Simple Annual (ROI)
0 %
Compound Annual Growth Rate (CAGR)
0 %
What is the ROI?
Return on Investment (ROI) is a common financial metric that assesses investment profitability by comparing the gain or loss to its cost. It calculates the return as [(Gain from Investment - Cost of Investment) / Cost of Investment] × 100, giving a percentage measure of return making it essential for comparing the efficiency of various investment opportunities in stocks, real estate, and business projects. Its ease of understanding and flexibility have also made ROI invaluable for quick comparisons; sophisticated metrics such as Annualized ROI and CAGR are often consulted for more in-depth insights on long-term investments vis-a-vis time and compounded growth.
What is the ROI Calculator?
An ROI Calculator is a simple mathematical model that allows potential investors to perform basic calculations to find out the ROI, Simple Annual ROI, and Compound Annual Growth Rate of their investments. In it, the input includes the initial amount, amount returned, and the investment period. Thus, it provides easy access to assessing the total gain on investment and allows for a comparison of performance over time.
How does ROI work?
The formula for ROI is:
ROI = [(Final Value - Initial Investment) / Initial Investment] × 100
where:
- Final Value is the value of the investment at the end of the period
- Initial Investment is the amount originally invested
Understanding the profitability of an investment can be simplified with an example. Let's say you invest a principal amount of Rs. 40,000 and receive a return of Rs. 50,000 after an investment period of 3 years. Below are the calculations for Total Gain, Return on Investment (ROI), and Compound Annual Growth Rate (CAGR).
1. Total Gain on Investment
The formula for Total Gain is:
Total Gain = Amount Returned - Amount Invested
Substituting the values:
Total Gain = 50,000 - 40,000
Total Gain = Rs. 10,000
2. Return on Investment (ROI)
The formula for ROI is:
ROI = (Total Gain ÷ Amount Invested) × 100
Substituting the values:
ROI = (10,000 ÷ 40,000) × 100
ROI = 25%
3. Compound Annual Growth Rate (CAGR)
The formula for CAGR is:
CAGR = [(Amount Returned ÷ Amount Invested)1 ÷ t] - 1
Substituting the values:
CAGR = [(50,000 ÷ 40,000)1 ÷ 3] - 1
CAGR = (1.250.333) - 1
CAGR ≈ 0.0772 or 7.72%
Summary
- Total Gain: Rs. 10,000
- Return on Investment (ROI): 25%
- Compound Annual Growth Rate (CAGR): 7.72%
Simple Annual ROI Calculation Formula
Simple Annual ROI helps measure the average annual return of an investment. The formula is:
Simple Annual ROI = ROI / Investment Period
where:
- ROI is the overall Return on Investment
- Investment Period is the number of years the investment was held
Compound Annual Growth Rate (CAGR) Formula
The CAGR represents the mean annual growth rate of an investment over a specified time period longer than one year. The formula is:
CAGR = [(Final Value / Initial Investment) ^ (1 / Investment Period)] - 1
where:
- Final Value is the value of the investment at the end of the period
- Initial Investment is the amount originally invested
- Investment Period is the duration of the investment in years
How to Use the ROI Calculator
- Enter the initial investment amount and final value of the investment.
- Click "Calculate" to view the ROI, Simple Annual ROI, and CAGR, helping you assess profitability.