The ROI for a project can be calculated by subtracting the cost of the investment from the gain from the investment, and then dividing the result by the cost of the investment. It's usually expressed as a percentage. So, for a project, the formula would be: ROI = (Net Profit / Cost of Investment) * 100%
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Imagine your company has two projects: Project A requires a $100,000 investment with expected cash flows of $30,000 annually for five years, while Project B requires a $50,000 investment with expected cash flows of $15,000 annually for five years. By calculating the IRR for each project, you can determine which project provides a higher return on investment, or ROI.