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ROI & Payback

Annual return on investment and payback period.

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These calculators cover general ROI, dividends, REITs, rental property, foreign investment and exit value.

The ROI and payback calculator compares annual net profit with the initial investment. It reports annual return on investment as a percentage and a simple payback ratio in years.

How it works

Enter the initial investment and annual net profit. The calculator divides annual profit by investment to obtain ROI, then divides investment by annual profit to obtain the simple payback ratio.

The formula

Annual ROI (%) = annual net profit ÷ initial investment × 100. Simple payback (years) = initial investment ÷ annual net profit.

Initial investment must be greater than zero. Annual net profit may be positive or negative in the engine, but a negative result represents a loss and the resulting negative payback ratio should not be interpreted as a real recovery period.

Worked example

An investment of 200,000 with annual net profit of 50,000 gives ROI = 50,000 ÷ 200,000 × 100 = 25% and simple payback = 200,000 ÷ 50,000 = 4 years.

Use this as a simple screening metric. Investment decisions may also require cash-flow timing, financing costs, taxes, risk, reinvestment assumptions and other return measures.

Frequently asked questions

Does ROI include the time value of money?

No. This calculator uses a simple annual profit-to-investment ratio and does not discount future cash flows.

Is the payback period the same as investment return?

No. ROI is a percentage, while simple payback indicates how many years of the entered annual profit would equal the initial investment.

What does a negative annual profit mean?

It produces a negative ROI. A negative payback ratio is mathematical output from the formula and should be treated as a loss indicator rather than a literal recovery period.

Last content reviewAugust 8, 2026
Editorial reviewHe-Sab Editorial Review

Sources and references

These sources are used to verify terminology, formulas, and information related to this calculator.