📊

ROI Calculator — Return on Investment Calculator

Calculate Return on Investment for your business and investment decisions

ROI Formula

Simple ROI: (Total Returns - Total Investment) / Total Investment × 100
Annualized ROI: (Total Returns / Total Investment)^(1/Years) - 1 × 100
$
$
$
$

ROI Calculator: Return on Investment Analysis

Table of Contents

2026 Investment Return Landscape

The investment environment in 2026 presents a complex picture where discount rates have become the binding constraint on valuations. With sticky inflation lifting term premia, understanding return expectations across asset classes has never been more critical for capital allocation decisions.

Equity Market Performance

The S&P 500 delivered 17.9% total return in 2025, marking the third consecutive year of double-digit gains. Since the bull market began in October 2022, cumulative returns have reached 100.6%. Technology stocks, fuelled by artificial intelligence spending, accounted for 53% of the index's 2025 performance.

Historical S&P 500 Average Annual Returns:

| Time Period | Nominal Return | Inflation-Adjusted | |-------------|----------------|-------------------| | 100 years | 10.45% | ~7.0% | | 50 years | 11.99% | 8.11% | | 30 years | 10.32% | 7.60% | | 20 years | 11.89% | 8.16% |

For 2026, Goldman Sachs and other major investment firms forecast S&P 500 returns of approximately 12%, citing continued earnings growth and resilient consumer demand. However, higher risk-free yields have raised hurdle rates across all asset classes, compressing valuations for growth-oriented investments.

Real Estate Returns

Real estate investment returns vary significantly by market and property type. Residential rental yields in 2025 ranged from exceptional performers like Detroit (21.95% gross yield) to mature markets such as San Diego (3-4% gross yield).

2025-2026 Real Estate Benchmarks:

| Market Type | Cash-on-Cash Return | Appreciation Potential | |-------------|--------------------|-----------------------| | Midwest Cash Flow | 8-12% | 2-4% annually | | Sunbelt Growth | 6-9% | 5-7% annually | | Coastal Premium | 3-5% | 3-5% annually | | Commercial (stabilised) | 5-8% | Varies by sector |

Commercial real estate shows signs of stabilisation in 2026. Colliers forecasts a 15-20% increase in sales volume as institutional and cross-border capital re-enters the market. Data centres remain the standout sector, with demand significantly outpacing supply.

AI and Technology Investments

Enterprise AI investment has reached an inflection point. Gartner projects AI application software spending to nearly triple to $270 billion in 2026. Organisations report average AI investment returns of 171%, with US enterprises achieving approximately 192%—exceeding traditional automation ROI by three times.

However, these figures require context: MIT research found a 95% failure rate for enterprise generative AI projects when measured against showing financial returns within six months. The disparity between successful implementations and failures is stark.

Why ROI Measurement Matters

ROI provides a universal language for comparing investments of vastly different types, scales and durations. A marketing campaign, equipment purchase, employee training programme and real estate acquisition can all be evaluated using the same fundamental metric.

The Hurdle Rate Context

Corporate investment decisions depend heavily on hurdle rates—the minimum acceptable return for a project to proceed. Research indicates that hurdle rates are substantially higher than the perceived cost of capital, on average twice as large.

Hurdle Rate Components:

Hurdle Rate = Weighted Average Cost of Capital (WACC) + Risk Premium

With higher interest rates in 2026, the cost of debt has increased, pushing hurdle rates upward. A project that would have been approved at a 10% hurdle rate in 2021 may now require 15% or higher to receive capital allocation.

Opportunity Cost Considerations

Every investment decision carries an implicit comparison to alternatives. The £50,000 deployed in equipment upgrades cannot simultaneously be invested in marketing expansion or workforce development. ROI analysis makes these trade-offs explicit and quantifiable.

How to Use This Calculator

Step 1: Enter Investment Cost Input the total amount invested, including all associated costs such as installation, training, implementation and financing charges. Hidden costs frequently cause ROI projections to miss reality.

Step 2: Enter Gain or Return Input the total value received or profit generated from the investment. For ongoing returns, enter the cumulative value over the measurement period.

Step 3: Specify Duration (Optional) For multi-year investments, enter the project duration in years. This enables annualised ROI calculation, essential for comparing investments of different lengths.

Step 4: For Complex Cash Flows Switch to NPV/IRR mode and enter year-by-year cash flows. This accounts for the time value of money—returns received earlier are worth more than equivalent returns received later.

Results Displayed:

  • Simple ROI percentage
  • Annualised ROI (adjusted for duration)
  • Payback period
  • Net Present Value (NPV) at specified discount rate
  • Internal Rate of Return (IRR)

The Mathematics of Returns

Simple ROI

The foundational ROI formula compares net gain to initial cost:

ROI = [(Total Gain - Investment Cost) / Investment Cost] × 100

Example: A £25,000 marketing campaign generates £40,000 in attributable revenue with £8,000 in variable costs.

  • Net gain: £40,000 - £8,000 = £32,000
  • ROI: [(£32,000 - £25,000) / £25,000] × 100 = 28%

Annualised ROI

Simple ROI ignores duration. A 50% return over five years differs dramatically from 50% in one year. Annualised ROI provides a standardised comparison:

Annualised ROI = [(1 + Total ROI)^(1/n) - 1] × 100

Example: 50% total return over 5 years:

  • Annualised ROI: [(1.50)^(1/5) - 1] × 100 = 8.45% per year

Example: 50% total return over 1 year:

  • Annualised ROI: 50% per year

The annualised figures reveal that the five-year investment significantly underperforms when time is considered.

Payback Period

Payback period indicates how quickly an investment recovers its initial cost:

Payback Period = Investment Cost / Annual Cash Inflow

Example: £120,000 equipment generating £45,000 annual savings:

  • Payback: £120,000 / £45,000 = 2.67 years

Shorter payback periods reduce risk but do not maximise total returns. A project with 2-year payback but 3-year useful life generates less value than one with 4-year payback and 10-year useful life.

Net Present Value (NPV)

NPV accounts for the time value of money by discounting future cash flows:

NPV = -Initial Investment + Σ [Cash Flow(t) / (1 + r)^t]

Where r is the discount rate and t is the time period.

Example: £100,000 investment, £35,000 annual returns for 4 years, 10% discount rate:

| Year | Cash Flow | Discount Factor | Present Value | |------|-----------|-----------------|---------------| | 0 | -£100,000 | 1.000 | -£100,000 | | 1 | £35,000 | 0.909 | £31,818 | | 2 | £35,000 | 0.826 | £28,926 | | 3 | £35,000 | 0.751 | £26,296 | | 4 | £35,000 | 0.683 | £23,906 | | Total | | | £10,946 |

Positive NPV indicates the investment exceeds the hurdle rate and should proceed.

Investment Benchmarks by Asset Class

Understanding typical returns by asset class provides context for evaluating specific opportunities.

Public Equities

Historical Equity Returns (Long-Term):

| Index | 20-Year Annualised | 2025 Return | |-------|-------------------|-------------| | S&P 500 | 11.89% | 17.9% | | FTSE 100 | ~7.5% | 5.7% | | MSCI World | ~9.5% | 14.2% | | Nasdaq Composite | ~14.0% | 28.5% |

The S&P 500's 2025 performance was driven disproportionately by technology: the "Magnificent Seven" (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, Tesla) contributed over half of index returns.

Fixed Income

Higher interest rates have improved bond yields from their 2021 lows:

| Instrument | Yield (Feb 2026) | |------------|-----------------| | US 10-Year Treasury | 4.3% | | UK 10-Year Gilt | 4.5% | | Investment Grade Corporate | 5.2-5.8% | | High Yield Corporate | 7.5-9.0% |

Real Estate

US Rental Property Benchmarks (2025):

| Market | Gross Rental Yield | Notes | |--------|-------------------|-------| | Detroit, MI | 21.95% | Highest yield major metro | | Cleveland, OH | 9.8% | Strong cash flow market | | Birmingham, AL | 13.6% | 3-bedroom forecasts | | Toledo, OH | 10.0% | Low entry prices | | Los Angeles, CA | ~6.0% | High appreciation potential | | San Diego, CA | 3-4% | Premium coastal market |

For 2026, Midwest markets offer immediate cash-on-cash returns whilst Sunbelt markets balance moderate yields with appreciation potential.

Private Equity and Venture Capital

Private market returns have moderated from peak years:

| Investment Type | Typical Target IRR | |-----------------|-------------------| | Buyout PE | 15-25% | | Growth Equity | 20-30% | | Venture Capital | 25-35%+ | | Real Estate PE | 12-18% |

These targets reflect gross returns; net returns after fees typically run 3-5 percentage points lower.

Worked Calculations with Current Data

Scenario 1: AI Automation Investment

Profile: Mid-size manufacturing company considering £500,000 AI quality control system expected to reduce defects by 40% and labour costs by £180,000 annually over 5 years.

Investment Details:

  • Initial cost: £500,000
  • Implementation and training: £75,000
  • Annual maintenance: £25,000
  • Total investment: £575,000 (Year 0) + £125,000 (maintenance over 5 years)

Returns:

  • Labour savings: £180,000 × 5 = £900,000
  • Defect reduction savings: £60,000 × 5 = £300,000
  • Total returns: £1,200,000

Calculations:

  • Simple ROI: [(£1,200,000 - £700,000) / £700,000] × 100 = 71.4%
  • Annualised ROI: [(1.714)^(1/5) - 1] × 100 = 11.4%
  • Payback: £575,000 / £240,000 annual savings = 2.4 years

NPV at 12% discount rate:

| Year | Cash Flow | PV Factor | Present Value | |------|-----------|-----------|---------------| | 0 | -£575,000 | 1.000 | -£575,000 | | 1 | £215,000 | 0.893 | £191,995 | | 2 | £215,000 | 0.797 | £171,355 | | 3 | £215,000 | 0.712 | £153,080 | | 4 | £215,000 | 0.636 | £136,740 | | 5 | £215,000 | 0.567 | £121,905 | | NPV | | | £200,075 |

The positive NPV and 11.4% annualised return exceed a 12% hurdle rate, supporting project approval. This aligns with industry data showing successful AI implementations delivering 171% average ROI.

Scenario 2: Marketing Channel Comparison

Profile: E-commerce retailer evaluating Q1 2026 marketing spend across three channels.

Google Ads:

  • Spend: £45,000
  • Revenue attributed: £157,500
  • ROAS: 3.5:1
  • ROI (net of COGS at 40%): [(£94,500 - £45,000) / £45,000] × 100 = 110%

Meta Ads:

  • Spend: £30,000
  • Revenue attributed: £66,000
  • ROAS: 2.2:1
  • ROI (net of COGS): [(£39,600 - £30,000) / £30,000] × 100 = 32%

Email Marketing:

  • Spend: £8,000 (platform + content creation)
  • Revenue attributed: £72,000
  • ROAS: 9:1
  • ROI (net of COGS): [(£43,200 - £8,000) / £8,000] × 100 = 440%

Email marketing delivers the highest ROI, consistent with industry benchmarks showing 261% average ROI for email. However, scalability differs: email reach is limited to existing subscribers whilst paid channels offer broader acquisition potential.

Scenario 3: Rental Property Investment

Profile: Buy-to-let property in Cleveland, Ohio—one of the top cash flow markets for 2026.

Purchase:

  • Property price: $145,000
  • Closing costs (3%): $4,350
  • Renovation: $15,000
  • Total investment: $164,350

Annual Operations:

  • Gross rent: $1,450/month × 12 = $17,400
  • Vacancy (5%): -$870
  • Property taxes: -$2,900
  • Insurance: -$1,200
  • Maintenance (10%): -$1,740
  • Property management (8%): -$1,392
  • Net Operating Income: $9,298

Calculations:

  • Cash-on-cash return (all cash): $9,298 / $164,350 = 5.66%
  • Cap rate: $9,298 / $145,000 = 6.41%
  • Gross yield: $17,400 / $145,000 = 12.0%

With financing (25% down at 7% interest):

  • Down payment: $36,250
  • Annual mortgage payment: ~$8,640
  • Cash flow after debt service: $658
  • Cash-on-cash return: $658 / ($36,250 + $4,350 + $15,000) = 1.18%

This illustrates how leverage amplifies both returns and risk. The all-cash purchase provides steady 5.66% returns whilst leveraged acquisition barely breaks even at current interest rates.

Marketing and Business ROI

Marketing ROI benchmarks help contextualise campaign performance against industry standards.

2026 ROAS Benchmarks by Platform

| Platform | Median ROAS | Top Performers | |----------|-------------|----------------| | Google Ads | 3.31x | Toys: 6.07x, Sports: 4.35x | | Meta Ads | 2.19x | Automotive parts: 6.76x, Baby: 4.39x | | TikTok Ads | 1.41x | Entertainment categories |

A good ROAS typically ranges from 2:1 to 4:1, though acceptable thresholds depend heavily on profit margins. High-margin businesses (software, services) can succeed with 2:1 ROAS whilst low-margin retailers may require 5:1 or higher.

B2B Marketing Benchmarks

B2B marketing ROI varies significantly by channel:

| Channel | Average ROI | Break-Even Time | |---------|-------------|-----------------| | SEO | 748% | 12-18 months | | Email Marketing | 261% | 1-3 months | | Webinars | 213% | 3-6 months | | PPC Advertising | 36% | 4 months |

The industry standard 5:1 ROI ratio should be adapted to specific circumstances. Cost-per-click prices continue rising 5-10% annually in competitive sectors, pressuring paid acquisition economics.

Attribution Challenges

Marketing ROI calculations face fundamental attribution problems. A website redesign may precede a 20% sales increase, but establishing causation requires controlled testing. Multi-touch attribution, where customers interact with multiple channels before converting, further complicates measurement.

Best practice involves:

  • Implementing proper tracking and attribution models
  • Running controlled experiments where possible
  • Acknowledging uncertainty in projections
  • Tracking actual versus projected results

Limitations and Professional Considerations

ROI analysis, whilst valuable, has important limitations that must be understood.

What ROI Does Not Capture

Risk: A 15% ROI from a volatile investment differs fundamentally from 15% from a stable one. Risk-adjusted metrics like Sharpe ratio provide better comparisons for uncertain outcomes.

Timing: Simple ROI ignores when returns occur. NPV and IRR address this limitation but require assumptions about discount rates.

Qualitative Benefits: Employee morale, brand equity, strategic positioning and learning may not be easily quantified but often matter significantly.

Opportunity Cost Beyond Capital: Management attention, organisational capacity and relationship capital are finite resources not captured in financial ROI.

Common Analytical Errors

Hidden cost omission: Implementation, training, maintenance and disruption costs frequently exceed initial projections. Include comprehensive cost estimates.

Optimistic projections: Conservative estimates with sensitivity analysis prove more useful than point estimates. Model best, expected and worst cases.

Duration mismatch: Comparing investments of different lengths without annualisation leads to poor decisions. Always annualise for comparison.

Sunk cost inclusion: Previously spent money should not factor into forward-looking ROI decisions. Focus on incremental costs and benefits.

When Professional Advice Is Warranted

Complex investment decisions benefit from professional analysis:

  • Large capital expenditures relative to company size
  • Investments with significant tax implications
  • Cross-border transactions with currency risk
  • Projects requiring regulatory approval
  • Situations where strategic considerations override financial returns

Sources

FAQs

What is a good ROI for business investments?

Acceptable ROI depends on risk, duration and alternatives. As a general benchmark, investments should exceed the company's weighted average cost of capital plus a risk premium—typically 10-20% for most business projects. Higher-risk ventures warrant higher thresholds.

How do I calculate ROI when returns vary each year?

Use NPV or IRR mode. Enter each year's cash flow separately, and the calculator determines present value (NPV) or the effective annual return rate (IRR). This accounts for timing differences in returns.

What is the difference between ROI and ROAS?

ROI measures profit relative to total investment: (Profit - Cost) / Cost. ROAS measures revenue relative to advertising spend: Revenue / Ad Spend. A 4:1 ROAS does not equal 400% ROI because ROAS ignores product costs and other expenses.

Why might a project have positive ROI but negative NPV?

This occurs when returns are delayed significantly. ROI ignores timing, whilst NPV discounts future cash flows. At high discount rates, delayed returns may produce negative NPV despite positive total returns.

How do I account for risk in ROI analysis?

Adjust the hurdle rate based on project risk. A speculative R&D project might require 25% returns whilst an efficiency improvement in proven technology might need only 12%. Alternatively, use probability-weighted scenarios for expected value calculations.

What is the typical hurdle rate for corporate investments?

Research indicates corporate hurdle rates average approximately twice the cost of capital. With 2026 capital costs elevated due to higher interest rates, typical hurdle rates range from 12-18% for most industries, with higher requirements for risky or speculative projects.

How do I compare investments with different durations?

Always annualise returns before comparison. A 60% return over 5 years (9.9% annualised) is less attractive than 40% over 2 years (18.3% annualised). The calculator provides both simple and annualised figures.

What ROI should I expect from marketing investments?

Industry benchmarks suggest 5:1 overall marketing ROI as a standard target. SEO typically delivers highest returns (748% average) but requires longer time horizons. Paid advertising returns vary by platform and industry, with 2:1 to 4:1 ROAS considered acceptable.

How accurate is payback period for investment decisions?

Payback period provides useful risk assessment—shorter payback reduces exposure to uncertainty. However, it ignores returns after the payback point and does not account for time value of money. Use alongside NPV and IRR for comprehensive analysis.

Can ROI analysis apply to personal investments?

ROI principles apply to personal decisions including education costs, property purchases and career investments. Use your personal opportunity cost (what returns you could achieve elsewhere) as the hurdle rate for comparison.