ROI Calculator
Calculate return on investment, payback period, and net gain.
Calculator
No signup required. Results are indicative—verify for your standards.
Annual net benefit: ₹3,00,000
ROI: 30.0%
Payback period: 3.3 years
Formula
ROI (%) = (Net gain / Investment) × 100. Net gain = Total benefit − Total cost. Payback period (years) = Initial investment / Annual net benefit.
Example calculation
Machine costing ₹10,00,000, annual savings ₹3,50,000, running cost ₹50,000/year. Annual net benefit = ₹3,00,000. ROI = 3,00,000/10,00,000 × 100 = 30%. Payback = 10,00,000/3,00,000 ≈ 3.3 years.
Engineering notes
Simple ROI ignores the time value of money. For large capital investments, use NPV (Net Present Value) or IRR (Internal Rate of Return) to account for the cost of capital. Payback period ignores cash flows after payback — a project with a 2-year payback but benefits for only 3 years is less attractive than one with a 3-year payback but benefits for 10 years.
When to use this calculator
- Capital expenditure approval — build the business case for purchasing new equipment or machinery
- Energy efficiency projects — justify investment in variable speed drives, LED lighting, or insulation
- Automation investment — compare manual vs automated process from a financial return perspective
- Vendor comparison — evaluate two machine options with different purchase prices and running costs
- Maintenance vs replacement — decide whether to continue repairing old equipment or invest in new
Frequently asked questions
- What is a good ROI for industrial capital investments?
- Typical hurdle rates: simple payback under 3 years (ROI > 33%) for most plant investments in India. Energy conservation projects often have a 1–2 year payback target. Large infrastructure investments may have 5–7 year payback thresholds. Most finance teams require ROI above the company's cost of capital (WACC), typically 12–18% in Indian manufacturing.
- What is the difference between ROI and NPV?
- ROI is a simple ratio of gain to investment, ignoring when cash flows occur. NPV discounts all future cash flows back to today's value using a discount rate (cost of capital). NPV > 0 means the project creates value. NPV is superior for comparing projects with different timings or lives. Use ROI for quick screening and NPV for final decision-making on large investments.
- What costs should I include in the investment for ROI calculation?
- Include all capital costs: equipment purchase price, installation, civil work, commissioning, training, and working capital increase. Include all annual benefits: energy savings, labour savings, waste reduction, quality improvement (scrap reduction), and maintenance savings. Include all annual costs: maintenance, consumables, depreciation (if relevant), and financing cost if the investment is debt-funded.