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ROI Calculator

Evaluate capital efficiency, profit gain, and annualised compound returns.

₹

Total capital or project expenditure committed

₹

Gross value returned or realized after exit

Years

Time elapsed between investment and return

Annualised Returns

A 100% ROI achieved over 1 year is vastly superior to a 100% ROI achieved over 10 years. Always examine Annualised ROI (CAGR) when comparing assets.

Results

Total Return on Investment
150.0%
Net Profit / Gain₹1,50,000
Annualised Return (CAGR)35.7%
Investment Multiple2.50x
Total Realized Value₹2,50,000

Standard metric for evaluating business initiatives and asset portfolios.

How Return on Investment is calculated

Return on Investment (ROI) evaluates the financial profitability and capital efficiency of an asset, commercial project, or corporate initiative. While total ROI shows the cumulative return over the entire investment lifecycle, Annualised ROI (CAGR) normalizes performance across time to enable direct comparisons between short-term and multi-year commitments.

Simple (Absolute) ROINet Profit = Final Value − Initial Cost
ROI % = (Net Profit ÷ Initial Cost) × 100
Annualised Compounded ROI (CAGR)Investment Multiple = Final Value ÷ Initial Cost
CAGR % = [(Final Value ÷ Initial Cost)(1 / Years) − 1] × 100

Step-by-step worked example

Consider an enterprise initiative with the default baseline parameters: an initial capital expenditure of ₹1,00,000 that yields a terminal gross return of ₹2,50,000 over a 3-year investment horizon:

MetricFormula / CalculationResultFinancial Meaning
1. Net Profit / Gain₹2,50,000 − ₹1,00,000₹1,50,000Absolute monetary surplus generated above the original capital committed.
2. Investment Multiple (MOIC)₹2,50,000 ÷ ₹1,00,0002.50×Every ₹1.00 invested returned ₹2.50 in total gross value.
3. Cumulative (Absolute) ROI(₹1,50,000 ÷ ₹1,00,000) × 100150.0%Total percentage gain across the entire 36-month period.
4. Annualised ROI (CAGR)[(2.50)(1/3) − 1] × 10035.72% p.a.Effective compound annual growth rate required to turn ₹1L into ₹2.5L in 3 years.

Why Time Horizon Redefines Capital Performance

A 150% total ROI sounds impressive in isolation, but its annual efficiency changes drastically based on holding duration:

DurationInitial CapitalFinal ValueCumulative ROIAnnualised Return (CAGR)Performance Evaluation
1 Year₹1,00,000₹2,50,000150.0%150.00%Exceptional turnaround velocity; venture capital scale.
3 Years (Default)₹1,00,000₹2,50,000150.0%35.72%Strong commercial growth rate; beats private equity hurdle.
5 Years₹1,00,000₹2,50,000150.0%20.11%Solid equity market outperformance.
10 Years₹1,00,000₹2,50,000150.0%9.60%Modest return; roughly tracks broad market index funds.

When to Use ROI vs. IRR vs. Payback Period

  • Use Simple ROI: When assessing discrete, single-inflow/single-outflow events, such as a marketing ad campaign, stock purchase, or quick equipment refurbishment.
  • Use Internal Rate of Return (IRR): When projects involve staggered capital expenditures or phased cash inflows occurring over multiple years (e.g., real estate rentals or corporate capital budgeting).
  • Use Payback Period: When capital recovery speed and liquidity risk take priority over lifetime project profitability.

Inflation & Tax Impact (Real vs. Nominal ROI)

Unadjusted nominal figures do not reflect the purchasing power eroded by consumer inflation:

  • Real ROI Formula: Real ROI ≈ Nominal ROI − Cumulative Inflation Rate.
  • Tax Drag: Capital gains taxes and corporate income taxes directly reduce terminal cash values. A 35.7% pre-tax CAGR under a 20% capital gains tax drops to an effective post-tax return of ~28.6% p.a.

Assumptions & Financial Limitations

  • Lump-Sum Timing Assumption: The model assumes the entire initial capital is deployed at day zero and the final value is liquidated in a single transaction at year n. Intermediate dividends, follow-on funding, or phased exits require an XIRR or DCF model.
  • Exclusion of Frictional Friction: Figures do not automatically deduct transaction fees, legal retainers, exchange fees, brokerage commissions, or carry charges unless pre-adjusted in the input values.
  • Risk Non-Adjustment: ROI is an unhedged metric that ignores downside volatility. A 40% ROI on speculative crypto entails vastly greater insolvency risk than a 15% ROI on blue-chip industrial infrastructure.
Evaluating capital recovery speed alongside total ROI?Read our capital budgeting comparison on Payback Period vs. Discounted Payback Period: Factoring Time Value into Capital Recovery to learn how liquidity risk and time horizon impact capital allocation decisions.

Frequently asked questions

What is a good ROI for business projects?
Most corporate finance teams benchmark internal projects against their Weighted Average Cost of Capital (WACC), typically requiring projects to yield at least 15% to 20% annualised ROI to justify capital risk.
How does ROI differ from IRR?
Simple ROI only examines starting cost and final payoff, ignoring cash inflows or outflows occurring along the way. The Internal Rate of Return (IRR) accounts for the exact timing and magnitude of intermittent cash flows.
What is the difference between total ROI and annualised ROI (CAGR)?
Total ROI measures the overall percentage gain across the entire investment lifecycle. Annualised ROI (CAGR) calculates the geometric compound annual growth rate, allowing direct comparison between investments of different durations.
Can ROI be negative?
Yes. If the final value is less than the initial capital invested, the net profit is negative, resulting in a negative ROI representing a capital loss.
How does inflation impact real ROI?
Nominal ROI does not reflect the loss of purchasing power over time. Real ROI adjusts nominal returns for inflation using the Fisher equation: Real ROI ≈ Nominal ROI − Inflation Rate.

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Total Return on Investment

150.0%