Return on Investment

1. Return on Investment
“AN INVESTMENT IN KNOWLEDGE PAYS THE BEST INTEREST.”
BENJAMIN FRANKLIN

2. Return on Investment
-the amount of gain or benefit from an investment made, usually
expressed as a percentage of the original total cost invested.
Abbreviation: ROI.

3. ROI- Calculation (Formula)
To calculate return on investment, the benefits (or returns) of an investment are divided by the
costs of the investment.
The result can be expressed as a percentage or a ratio. The higher the percentage the better the
return.
(Gains from Investment – Cost of Investment)
÷ Cost of Investment__________
= Return on Investment (ROI)

4. Shari would like to invest in herself in order to improve future life quality for herself and her daughter.
Investing in a new career was an interesting idea so Shari took a tour of a very reputable Cosmetology school.
The school was amazing. Shari loves everything there is about the Beauty Industry and has thought about getting
a Cosmetology license since graduating from High School - 3 years ago. She has some decisions to make.
Shari has been working at a local fast food establishment .Her wage is currently $9.00 an hour .
She is a full time employee or $ 18,720 a year .
Going to Cosmetology school would require Shari to take out a student loan for the tuition
and some living expenses during the year it takes to complete .
Her current employer would allow her adjust her schedule back to part time-,or 20 hours per week .
Transportation back and forth to school will cost $25 a week and school specific childcare will cost $150 a week.
The Bureau of Labor statistic’s most recent data ( May 2013) shows a median salary range of $23,140 a year with
75% of Cosmetologist’s making $31,110 a year and 90% making $44,220 a year .
How can Shari use this information to determine if investing in herself by pursuing a career in Cosmetology is a good choice ?
Scenario

5. Investment in a Career:Cosmetology
Monetary investements:
Student loan- tuition, living expenses, and interest
Lack of wages
Transportation
childcare

6. Cost of Investment- Cosmetology School
Student Loan $22,000
◦ Includes tuition, living expense and interest
Lost Wages- 9,360
◦ FT to Part Time- 12 months
Transportation 1,300
◦ 12 months
Childcare 7,800
o 12 months __________
Total Investment $40,460

7. The Bureau of Labor statistic’s most recent data ( May 2013)
shows a median salary range of $23,140 a year with
75% of Cosmetologist’s making $31,110 a year and 90%
making $44,220 a year .
www.bls.gov
Gains from Investment

8. Gains from Investment
• Based on the student loan term of 10 years.
• Cosmetologist salary based on May 2013 data from
the Bureau of Labor Statistics: http://www.bls.gov
• Current salary based on a starting wage of $9 per hour
with a 3% increase annually
Total Gain from Investment -$110,488

9. ROI- Calculation (Formula)
Gains from Investment $ 110,488
Cost of Investment - 40,460
$70,028
Cost of Investment ÷ 40,460
Return on Investment (ROI) 173%

10. Shari did her research:
Cost of Investment
Gains from Investment
Return on Investment (ROI)- 173%
Will knowing the ROI help Shari make a decision?