Читать книгу Finance & Grow Your New Business - Angie Mohr - Страница 27

This tells us that, over five years, the company will generate $13,171 in net positive discounted cash flow. We also know that you will have to invest $50,000 to get that cash flow. The calculation for your average annualized return on investment (ROI) is:

ROI = net cash flow ÷ investment ÷ # years

Therefore, your roi in this scenario will be:

ROI = 13,171 ÷ 50,000 ÷ 5 = 5.27%

Your average annual return on your initial investment is 5.27 percent. This calculation is helpful in deciding whether to invest the money in this business or another business or another type of investment altogether. It is important to realize, however, that after year five, the cash flow is in permanently better position as the company matures. Therefore, by the time year six rolls around, the business will be generating in excess of $46,000 in net profit; a much higher return for the initial investment. Return on investment analysis will change depending on the time frame used.