Return on investment answers one question – how much did the money earn, relative to what you put in? The calculator does it two ways. From the result: enter what you invested and what you got back, and how long you held it, for the ROI and the annualized return. From monthly income: enter the cost and the net income it brings each month, for the payback time and the ROI over a horizon.
Example: you bought equipment for $10,000 and sold the business three years later, receiving $14,500 in all. ROI = 4,500 ÷ 10,000 = 45%. Spread over three years with compounding, that is 13.19% a year – the rate to compare with a savings account or an index fund.
ROI and the annualized return
The same total ROI is a very different investment depending on how long it took:
| Growth of the money | Held for | Total ROI | Annualized (CAGR) | Simple average a year |
|---|---|---|---|---|
| × 1.5 | 1 year | 50% | 50.00% | 50.00% |
| × 1.5 | 3 years | 50% | 14.47% | 16.67% |
| × 1.5 | 5 years | 50% | 8.45% | 10.00% |
| × 1.5 | 10 years | 50% | 4.14% | 5.00% |
| × 2 | 5 years | 100% | 14.87% | 20.00% |
| × 2 | 10 years | 100% | 7.18% | 10.00% |
| × 3 | 10 years | 200% | 11.61% | 20.00% |
The simple average (ROI ÷ years) always looks better than the compounded rate, and it is the number people often quote. CAGR is the honest one: it is the rate a bank would have to pay to give you the same result.
Rule of 72: divide 72 by the yearly rate to see roughly how long money takes to double. At 7% a year, 72 ÷ 7 ≈ 10.3 years (exactly 10.24).
Payback time
| Investment | Net income a month | Growth a year | Payback |
|---|---|---|---|
| $10,000 | $400 | none | 25 months |
| $10,000 | $400 | 5% | 25 months |
| $25,000 | $350 | none | 72 months (6 years) |
Growth only starts to help after the first year, so for short paybacks it changes little. For solar panels, a rental property or a machine, also count what the asset is still worth at the end: add its resale value to “what you got back” to see the full return.
What ROI leaves out
- Inflation: a 10% return in a year of 4% inflation is about 6% in real terms.
- Taxes and fees: use the amounts after them.
- Risk: two investments with the same ROI can have very different chances of losing money.
- Timing of cash: for investments with many payments in and out, finance teams use NPV or IRR, which weigh each payment by when it happens. For one sum in and one sum out, CAGR and IRR are the same.
To see a sum grow at a fixed rate, use the compound interest calculator. Everything is calculated on your device; nothing is sent anywhere, and once zet4u is saved there the calculator works offline.
Frequently asked questions
How do I calculate ROI?
ROI = (what you got back − what you invested) ÷ what you invested, as a percentage. $10,000 that became $14,500 is (14,500 − 10,000) ÷ 10,000 = 45%. Count everything you got back – the sale price plus any income along the way – and everything you put in, fees included.
What is annualized ROI (CAGR)?
The yearly rate that, compounded, turns the investment into the final value: (final ÷ invested)^(1 ÷ years) − 1. 45% in 3 years is 13.19% a year; 45% in 10 years is only 3.79% a year. Use it to compare investments held for different lengths of time.
What is a payback period?
The time until the income from an investment adds up to what it cost. A $10,000 machine that brings in $400 a month net pays for itself in 25 months. It ignores what happens after – which is why the calculator also shows the ROI over a horizon you choose.
Is a higher ROI always better?
Not on its own. Compare risk (can you lose the money?), time (a 20% return over 5 years is less than 5% a year), and how much work or cash the investment ties up. ROI also ignores inflation and taxes: subtract them for the real return you keep.
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