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ROI Calculation Guide

Walks through calculating ROI for a decision with a worked example and common pitfalls. Educational, not financial advice.

VettedUpdated June 2026
The prompt
Explain how to calculate ROI for {{decision}} using these figures: {{inputs}}. Show the formula, the worked calculation, how to handle time (annualized vs total), and two pitfalls (ignoring hidden costs, comparing different time frames). End with: This is an educational explainer, not financial advice.
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Variables

decisionDecision
inputsFigures

Example output

Calculating ROI for a new packaging machine. Figures: cost $40,000; annual savings $15,000; expected life 5 years. Formula: ROI = (net gain / cost) x 100. Total: net gain over 5 years = (15,000 x 5) - 40,000 = 35,000; ROI = 35,000 / 40,000 = 87.5% over five years. Annualized: roughly 13.4% per year, which is more comparable to other options. Pitfalls: ignoring hidden costs like maintenance and training, which lower the real return; and comparing a 5-year total against a 1-year figure elsewhere — always match the time frame. This is an educational explainer, not financial advice.

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Author

AI Khazna

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