The document discusses return on investment (ROI) and provides an example to calculate ROI. It presents a scenario of Shari considering investing in cosmetology school. The costs of the investment include $22,000 for tuition and living expenses, $9,360 in lost wages from working part-time, $1,300 for transportation, and $7,800 for childcare, totaling $40,460. The potential gains are a cosmetologist salary of $110,488 over 10 years. Calculating ROI as (gains - costs) / costs, Shari's ROI for the investment in cosmetology school is 173%.

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

2. Return on
Investment
The amount of gain/profit
(or benefit), from an
investment made, usually
expressed as a percentage of
the original total cost
invested
Abbreviation: ROI
Watch the Video for several
examples of 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. Meet Shari.
Shari has been working at a local restaurant.
Her wage is currently $9.00 an hour.
She works a full time schedule of 40 hours per week ,
or $ 18,720 a year.
Shari has been thinking about getting a new career.
She is interested in becoming a Cosmetologist

5. Shari took a tour of a Cosmetology school.
The school was amazing!

6. Going to Cosmetology school
will require Shari to take out a
student loan for the tuition
and some living expenses during
the year it takes to complete. A
total of $22,000
Shari’s employer has
agreed to adjust her schedule
to part time-,or 20 hours per week,
causing loss of wages of $9,360 while she’s in school.

7. Transportation to school will cost $25 a week
and childcare will cost $150 a week.

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

9. 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

10. www.bls.govAnnual Salary

11. Salary Comparison
Cosmetologist salary based on May 2013 data from
the Bureau of Labor Statistics: http://www.bls.gov
based on a starting wage of $9 per hour
with a 3% increase annually
Student loan term- 10 Years

12. Gains from Investment
Total Gains
From
Investment

13. 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%

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