Refinance Mortgage Rate Calculator

by

Return on Investment (ROI) Calculator







Your Investment Results:

Net Profit: $—

ROI: —%

function calculateROI() { var initialInvestment = parseFloat(document.getElementById("initialInvestment").value); var currentValue = parseFloat(document.getElementById("currentValue").value); var additionalInvestment = parseFloat(document.getElementById("additionalInvestment").value); var netProfit = 0; var roiPercentage = 0; if (isNaN(initialInvestment) || isNaN(currentValue) || isNaN(additionalInvestment)) { document.getElementById("netProfit").textContent = "Invalid input"; document.getElementById("roiPercentage").textContent = "Invalid input"; return; } var totalInvestment = initialInvestment + additionalInvestment; netProfit = currentValue – totalInvestment; if (totalInvestment > 0) { roiPercentage = (netProfit / totalInvestment) * 100; } else if (currentValue > 0) { // If total investment is zero but there's a positive current value, it's infinite ROI roiPercentage = Infinity; } else { roiPercentage = 0; // If both are zero or negative, ROI is zero } document.getElementById("netProfit").textContent = netProfit.toFixed(2); if (roiPercentage === Infinity) { document.getElementById("roiPercentage").textContent = "Infinite"; } else { document.getElementById("roiPercentage").textContent = roiPercentage.toFixed(2); } }

Understanding Return on Investment (ROI)

Return on Investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments. ROI is calculated by dividing the net profit (or loss) from an investment by the initial cost of the investment.

The ROI Formula

The basic formula for calculating ROI is:

ROI = (Net Profit / Cost of Investment) * 100

Where:

  • Net Profit = Current Value of Investment – Cost of Investment
  • Cost of Investment = Initial Investment + Any Additional Investments

Why is ROI Important?

ROI is a crucial metric for investors and businesses because it provides a simple yet powerful way to:

  • Assess Profitability: It tells you how much money you've made (or lost) relative to how much you put in.
  • Compare Investments: You can use ROI to compare different investment opportunities and decide where to allocate your capital for the best potential returns.
  • Measure Performance: It helps track the performance of past investments and informs future investment strategies.
  • Make Informed Decisions: Understanding ROI empowers you to make smarter financial choices.

Factors to Consider with ROI

While ROI is a valuable tool, it's important to consider:

  • Time Period: ROI doesn't inherently account for the time it took to achieve the return. An investment with a high ROI over a short period might be more attractive than one with a similar ROI over a very long period. Annualized ROI can help address this.
  • Risk: Higher potential ROI often comes with higher risk.
  • Taxes and Fees: The calculation shown here is a simplified version. Actual ROI calculations may need to factor in taxes, transaction fees, inflation, and other costs.

Example Calculation

Let's say you invested $10,000 in a stock (initial investment). After a year, the value of your stock has grown to $15,000. During that year, you also decided to invest an additional $2,000 into the same stock.

  • Initial Investment: $10,000
  • Current Value: $15,000
  • Additional Investment: $2,000

First, calculate the total investment:

$10,000 (Initial) + $2,000 (Additional) = $12,000 (Total Investment)

Next, calculate the net profit:

$15,000 (Current Value) – $12,000 (Total Investment) = $3,000 (Net Profit)

Finally, calculate the ROI:

($3,000 (Net Profit) / $12,000 (Total Investment)) * 100 = 25%

In this scenario, your Return on Investment is 25%. This means for every dollar you invested, you gained $0.25 in profit.

Leave a Comment