1. Scope
Converts an initial investment and periodic returns into ROI, annualised ROI, and payback month. It does not discount future cash flows (see the Business Valuation Calculator for DCF) and does not model tax.
2. Inputs and outputs
Inputs
- initialInvestment number (currency)
- monthlyReturn number (currency)
- horizonMonths number default: 36
Outputs
- totalReturn
Sum of monthlyReturn × horizonMonths.
- roi
(totalReturn − initialInvestment) / initialInvestment.
- annualizedRoi
(1 + roi) ^ (12 / horizonMonths) − 1.
- paybackMonth
First month at which cumulative return ≥ initialInvestment.
Engine source: src/lib/roi-payback-calculator/engine.ts
3. Formula / scoring logic
total_return = monthly_return * horizon_months
roi = (total_return - initial_investment) / initial_investment
annualized_roi = (1 + roi) ^ (12 / horizon_months) - 1
payback_month = ceil(initial_investment / monthly_return)4. Assumptions
- Returns are steady-state; seasonality and ramp are out of scope.
- No discount rate — cash today and cash in month 36 count equally.
- No tax or transaction cost is netted.
5. Data sources
6. Known limitations
- Not a DCF. For an investment with a long horizon or staged cash flows, use a discount-rate-aware model.
- Nominal ROI ignores inflation. Deflate inputs with a CPI or PPI adjustment before entry if required.
7. Reproducibility
Input
initialInvestment = $10,000, monthlyReturn = $500, horizonMonths = 36.
Expected output
total_return = $18,000, roi = 80%, annualized_roi ≈ 21.6%, payback_month = 20.
8. Change log
- 2026-04-24 methodology page first published.