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Return on investment (ROI) is the ratio of the net change in an investment's value (positive and negative) to the value of the original investment. The basic return on investment formula is ROI = (Cn/V0), where C is the net change in value for the investment, n is the elapsed time since the initial investment, and V0 is the initial value of that investment (at Time 0). This evaluation can be made for past, present, and future investments and their actual or projected changes in value.

Applications

While ROI can be expressed as a simple ratio, difficulties arise when a decision maker must compare investments that differ in their initial investment amounts and in the amounts and timing of their subsequent changes in investment value. Furthermore, difficulties ...

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