In short
- ROI tells you how much you gain; the payback period, when the money comes back.
- NPV compares the project with what you could get from an alternative.
- Use net cash flows, not sales, and try a cautious scenario.
Three questions, three figures
Before buying a machine, opening premises or launching a project, answer three questions:
- How much do I make in total? ROI compares the gain with the amount invested.
- When do I get my money back? The payback period shows when the investment returns.
- Is it worth it compared with other options? NPV (net present value) expresses all future cash flows in today's money and subtracts the investment.
A worked example
Example calculated with our calculator
| Initial investment | €12,000 |
| Net annual cash flow for 4 years | €4,000 |
| ROI (undiscounted) | 33.3%: you gain €4,000 on €12,000 |
| Payback period | 3 years (3.6 years discounted at 8%) |
| NPV at 8% | €1,248.51 |
Why NPV matters
A euro in four years is worth less than a euro today, because today you could invest it or use it for something else. The discount rate captures the return you require: what you could get from an alternative with similar risk.
If NPV is positive, the project earns more than that rate. In the example, at 8% the NPV is €1,248.51; if you required 10%, it would fall to €679.46. Still positive, but with a thinner margin.
Common mistakes
- Using sales instead of net cash flows: subtract the costs, maintenance and taxes the project generates.
- Looking only at the payback period: two projects can pay back at the same time and leave very different gains afterwards.
- Forgetting residual value: what you could get by selling the equipment at the end.
Watch out: future cash flows are estimates. Try a cautious scenario before deciding.
Work it out with your numbers
The calculator gives you ROI, NPV and the simple and discounted payback period, year by year.
Sources and review. Our own calculation with the Numveria return on investment calculator. This guide does not cite external data. Reviewed on 3 November 2026.