ROI & Payback Calculator
Return on investment, annualized growth, and payback period.
The upfront investment or loan amount.
Worth at the end of the horizon.
Used to derive the annualised CAGR.
Optional. Constant yearly cash flow used for the payback period.
Total ROI
- CAGRper year
- 12.47%
- Net gain
- $80,000.00
- Payback period4 yr 0 mo
- 4 yr
ROI is the total return over the horizon; CAGR annualises it. Payback assumes a constant yearly cash flow.
How the ROI calculator works
This tool measures three things about an investment: how much you gained in total, how fast that gain compounded per year, and how long the cash flows take to repay what you put in.
Total ROI is the overall return as a decimal. The formula is roi = (finalValue - cost) / cost. A result of 0.5 means you ended with 50% more than you started. CAGR (compound annual growth rate) restates that gain as a steady yearly rate using cagr = (finalValue / cost)^(1/years) - 1. It answers “what constant annual return would turn the cost into the final value over this many years?” CAGR is only computed when you supply a number of years.
Payback period is the time to recover the cost from the cash an investment throws off. With a single constant yearly flow it is simply payback = cost / annualCashFlow. With a list of varying flows, the calculator adds them up period by period and finds where the running total first reaches the cost, then interpolates the fraction of the crossing period: period_index + (cost - cumulativeBefore) / flowInThatPeriod.
Worked example
A small fit-out costs 25,000. You expect it to be worth 40,000 after 4 years, with yearly cash flows of 8,000, 9,000, 10,000, and 13,000.
- ROI: (40,000 - 25,000) / 25,000 = 15,000 / 25,000 = 0.60 (60%)
- CAGR: (40,000 / 25,000)^(1/4) - 1 = 1.6^0.25 - 1 ≈ 0.1247 (12.47% per year)
- Payback: cumulative cash is 8,000, then 17,000, then 27,000. The cost of 25,000 is crossed during the third period (index 2): 2 + (25,000 - 17,000) / 10,000 = 2 + 0.8 = 2.8 years
So the project returns 60% overall, compounds at about 12.5% a year, and repays its cost in 2.8 years.
How to use it
- Enter the cost (your initial outlay) and the final value (worth at the end of the horizon). Both drive the ROI figure.
- Add the number of years to see the annualized CAGR. Leave it blank if you only want total ROI.
- For payback, pick constant when each period returns the same amount, or varying to enter a per-year list. The constant option takes priority if both are filled.
- Read CAGR when comparing two investments of different lengths, since total ROI alone hides duration.
Limitations
This is an estimate, not investment advice. Plain ROI and payback ignore the time value of money, so they treat early and late cash flows as equal. The figures assume your final value and cash flows are accurate, and they exclude taxes, fees, inflation, and reinvestment of the cash flows. CAGR smooths over volatility between the start and end points, so it says nothing about the path or the risk taken to get there. For decisions involving discounting, financing, or tax, confirm with a qualified financial professional.
Frequently asked questions
What is the difference between ROI and CAGR?
ROI is the total return over the whole holding period as a single percentage, ignoring how long it took. CAGR converts that same gain into a steady yearly rate, so a 60% ROI earned over four years is a much lower annual return than 60% earned in one year. Use ROI to size the overall gain and CAGR to compare investments of different lengths.
Can ROI be negative?
Yes. If the final value is below the cost, ROI is negative. For example, putting in 1,000 and ending with 400 gives (400 - 1,000) / 1,000 = -0.6, or -60%. The calculator reports losses as negative percentages.
Why does the calculator show no payback period sometimes?
Payback only appears when you enter cash flows. If the total of the cash flows you list never reaches the cost, the investment is not recovered within that horizon and no payback period is returned. Add more periods or larger flows to see when it crosses.
Should I use the constant cash flow or the varying cash flow option?
Use the constant option when each period returns roughly the same amount, such as a fixed lease income. Use the varying list when returns ramp up or change year to year, since the calculator then finds the exact period where cumulative cash crosses the cost and interpolates the fraction of that period.
Does ROI account for the time value of money?
No. Plain ROI and the payback period treat a dollar received later the same as a dollar today. For discounting future cash flows, use net present value or internal rate of return instead. CAGR does reflect time, but only by smoothing the start and end values into an annual rate.