Question

You are to propose a recommendation to lease the 2000 square foot space. What would you use it for and would it provide a positive return on investment?

Answer 1

Return on Investment:

  
Return on investment (ROI) is a financial ratio used to calculate the benefit an investor will receive in relation to their investment cost. It is most commonly measured as net income divided by the original capital cost of the investment. The higher the ratio, the greater the benefit earned.

a ratio between net profit (over a period) and cost of investment (resulting from an investment of some resources at a point in time). A high ROI means the investment's gains compare favourably to its cost. As a performance measure, ROI is used to evaluate the efficiency of an investment or to compare the efficiencies of several different investments.[1] In economic terms, it is one way of relating profits to capital invested.

How do you analyze:

An analyst compares the return of investment against the cost to determine whether or not the value of the investment has gone up. To find the return on investment, one needs to divide the return by the cost of the investment. One can express the resultant number either as a percentage or ratio

ROI Formula:

Return on investment can be calculated in different ways depending on the goal and application. The most comprehensive formula is:

Return on investment (%) = (current value of investment if not exited yet + income from investment − initial investment and other expenses) / initial investment and other expenses x 100%.

For a single-period review, divide the return (net profit) by the resources that were committed (investment):[3]

return on investment = Net income / Investment
where:
Net income = gross profit − expenses.
investment = stock + market outstanding[when defined as?] + claims.
or

return on investment = (gain from investment − cost of investment) / cost of investment[1]
or

return on investment = (revenue − cost of goods sold) / cost of goods sold

There are several versions of the ROI formula. The two most commonly used are shown below:

Or

ROI = Net Income / Cost of Investment

or

ROI = Investment Gain / Investment Base

Return of integration:

To address the lack of integration of the short and long term importance, value and risks associated with natural and social capital into the traditional ROI calculation, companies are valuing their environmental, social and governance (ESG) performance through an integrated management approach to reporting that expands ROI to Return on Integration. This allows companies to value their investments not just for their financial return but also the long term environmental and social return of their investments. By highlighting environmental, social and governance performance in reporting, decision makers have the opportunity to identify new areas for value creation that are not revealed through traditional financial reporting.The social cost of carbon is one value that can be incorporated into Return on Integration calculations to encompass the damage to society from greenhouse gas emissions that result from an investment. This is an integrated approach to reporting that supports Integrated Bottom Line (IBL) decision making, which takes triple bottom line (TBL) a step further and combines financial, environmental and social performance reporting into one balance sheet. This approach provides decision makers with the insight to identify opportunities for value creation that promote growth and change within an organization.

a good thing, particularly when it's from riskier investments. A positive means that the investor has received back more than they initially invested. One thing to remember though is that the calculation does not take into account the time value of money.