Commercial Project ROI Calculator
Evaluate the financial performance of a commercial project by calculating net profit, ROI percentage, payback period, and annualized ROI based on your total investment, annual revenue, annual operating costs, and project lifespan.
Formulas Used
Annual Gross Profit = Annual Revenue − Annual Operating Costs
Annual Tax = Annual Gross Profit × Tax Rate (only if Gross Profit > 0)
Annual Net Profit = Annual Gross Profit − Annual Tax
Net Salvage Value = Salvage Value × (1 − Tax Rate)
Total Net Profit = (Annual Net Profit × Years) + Net Salvage Value − Initial Investment
Total ROI (%) = (Total Net Profit ÷ Initial Investment) × 100
Annualized ROI (%) = [(1 + Total ROI / 100)1/Years − 1] × 100
Simple Payback Period = Initial Investment ÷ Annual Net Profit
Profit-to-Investment Ratio = Total Net Profit ÷ Initial Investment
Assumptions & References
- Revenue and operating costs are assumed constant across all years (no inflation adjustment).
- Tax is applied only when annual gross profit is positive; losses do not generate a tax credit in this model.
- Salvage value is taxed at the same effective rate as operating income (simplified capital gains treatment).
- The annualized ROI uses the Compound Annual Growth Rate (CAGR) formula for geometric annualization.
- Simple payback period does not account for the time value of money; for discounted payback, use a DCF model.
- No depreciation deduction is modelled separately; operating costs should include any depreciation-equivalent charges if relevant.
- Reference: Investopedia — Return on Investment (ROI); CFA Institute — Capital Budgeting.