Question

I want to find the ROI of a situation where the investment cost is 339 800 kr and the saved cost is 553 750kr. My way of calculating it: ROI= Cost of new investment/Saved cost ROI= 339 800kr / 553 750 kr= 0.511 Is that right? And if so, what does the answer 0.511 tell me? If this is not right. How do I calculate the ROI, of the given numbers? Can you please explain the answer propaply, what will the value of ROI mean in practise? Can you please explain briefly

Answer 1

Return on Investment (ROI) = {Net profit(Saved Cost in this case)/Total investment}*100

It is the ratio of profit or loss expressed in terms of total investment in a financial year. For example = if you invested $100 in a stock and it's value increased to $120 then return on investment is 20% for a financial year.

So, ROI = {553750/339800}*100 =162.96. which says that the return on the amount which you invested is 162.96% i.e. profitable.