Calculate manufacturing or equipment ROI from added profit and investment, plus payback period, yearly ROI and annualized return.
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Manufacturing ROI Formula
The following formula and example outline the steps and information needed to calculate the Manufacturing ROI.
Formula source: Economic Impact Analysis Of Proposed Effluent Limitations and Standards For The Inorganic Chemicals Industry—Phase II (U.S. EPA, 2000)
Variables:
- MROI is the Manufacturing ROI (%)
- IP is the total incremental net profit after operating costs, over the stated measurement period ($)
- TI is the total investment into the manufacturing ($)
How to Calculate Manufacturing ROI?
The following steps outline how to calculate the Manufacturing ROI.
- First, determine the total increase in profit generated from manufacturing ($).
- Next, determine the total investment into the manufacturing ($).
- Next, gather the formula from above: MROI = IP / TI * 100.
- Finally, calculate the Manufacturing ROI.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
total increase in profit generated from manufacturing ($) = 50,000
total investment into the manufacturing ($) = 25,000
MROI = IP / TI * 100 = 50,000 / 25,000 × 100 = 200%. Simple payback uses equal net cash inflows rather than accounting profit. Annualized ROI assumes a total investment gain with capital recovery and no interim distributions.
