4 Oct 2022


How to Calculate Return on Investment (ROI)

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Over the last few decades, the entrepreneurship world has undergone a major evolution that has precipitated into a management-style revolution. Erstwhile, commercial entities were led and managed by executive chairmen whose cardinal qualification was majority shareholding; few relics of this system still exist with Donald Trump being a good case in point. The system transformed with the executive chairmen aforesaid giving way to technocrats, a breed of highly educated and motivated entrepreneurial supermen who handled all the important aspects in a company, a seemingly and probably actually impossible task. 

This has in the recent years given way to a team-effort management system that incorporates professionals from all fundamental aspects of management including production, accounting, sales and marketing, and human resource management (HRM) (PayScale, 2016). To the management, my informed and well thought out perspective is that HRM works like a constitution, since as long as there is employment, there will be HRM. This was my premise for pursuing a course in Business Administration with an intention of pursuing a career in HRM, and why I believe it to be a good academic investment that will not only bring a proper return over and above my investment including student loans, but also accord me a satisfying career. 

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My career choice however comes at a steep academic price with a combined package incorporating both tuition and textbooks amounting to US$1,425 dollars for every three credit hours with a total minimum of 120 credit hours thus making my average academic cost roughly US$57,000.00. Out of this amount, I will be able to foot approximately US$13,300.00 with the balance of US$43,700.00 being sourced from student loans whose interest rates I envisage to be approximately 3.76% on a reducing balance. On a worst case scenario, I anticipate to fully pay back the aforesaid loan in 10 years which places the steepest interest rates to be approximately US$15,000.00. I also modestly estimate my miscellaneous academic expenses to be approximately US$20,000.00. My total academic cost will therefore be US$92,000.00: this can be termed as the total investment or capital that I am putting down for my career, if I were to term the same as a commercial venture. 

As earlier indicated, my careful research regarding HRM is that it has gradually grown into an indispensable aspect of management with many if not most entities preferring to have specialized professionals handle this docket (Connelly, 2011). Further, HRM professional are gradually getting promoted to the highest echelons of the management chain: this almost guarantees the availability of a ready job for any HRM professional who is capable of proving his mettle in recruitment exercise as well as guarantee an opportunity for growth in the career line. This was part of my fundamental considerations while making my career choice. I, therefore, will not factor an extended period between my graduation and my first employment. This implies that I will operate with a 12 month assumption window between graduation and formal salary-earning employment. 

On an average, a HRM professional earns about US$63,000.00 per annum which is what I anticipate to earn in the first three years of employment with the figure rising to about USD 75,000.00 per annum for the 4 th and 5 th year (PayScale, 2016). With hard work, dedication, and continuous academic advancement, I anticipate achieving a promotion with the salary from the 6 th to the 10 th year being approximately US$105,000 per annum. Considering that I intend to set aside US$ 5,000.00 per annum for my student loans, it is at this point, having considered all other general eventualities that I will have cleared my student loans, which makes it a good place to also re-evaluate my academic investment and its returns so far (PayScale, 2016). 

With the first three years bringing in a gross return of US$ 189,000 which should amount to a net return of approximately US$ 110,0000 after excluding taxes and kindred expenses, the subsequent two years bringing in another US$150,00 gross which will now amount to a net of approximately US$100,000.00. The remaining five years will bring in a gross of US$525,000.00 which amounts to a net of US$ 350,000.00, the total net returns for the first 10 years of employment stand at approximately US$610,000. I would therefore consider this to be the gross returns from my academic investment of US$ 92,000.00. However, to get a picture of the net returns, I need to consider how much I would have earned if I were in unskilled employment and also factor in a scenario where I would have ventured into business straight from high school. 

The minimum wage in the District of Colombia is the highest in the United States and currently stands at US$11.50 with the figure anticipated to remain unchanged for several years. If I were to consider myself an unskilled laborer who by some miracle manages to find continuous employment in the aforesaid district for the 10 years indicated above, my pay for the duration would be approximately US$230,000. The foregoing, therefore, makes the difference between this figure and the anticipated net income from my skilled labor the net value realized from my academic investment for the 10 years which amounts to US$380,000.00. This clearly confirms that even with college loans being factored in the matrix, my academic investment will still realize a handsome return in only 10 years. 

Secondary factors include the idea that I could have invested the aforesaid US$92,000.00 and realized a more handsome profit which some anti-higher education commentators have even placed at millions of dollars while quoting the Bill Gates and Steve Jobs of contemporary America (Connelly, 2011). It is however, my informed contention that this is a fallacy first premised on the fact that making big break in entrepreneurship as an individual is the exception, not the norm. For every Bill Gates and Steve Jobs out there, there are hundreds of thousands of Toms, Dicks and Harry’s who failed miserably, declared bankrupt, committed suicide or lived miserable lives (Connelly, 2011). On the other hand, the level of financing available to a young person seeking employment cannot be extended to the same young person who seeks to invest. Finally, an academic investment comes with the unquantifiable returns vested in a better quality life. It is on these premises that I genuinely believe that the monies, time, and energy invested in my academics are a worthy investment that will eventually realize a handsome return. 


Connelly, D. (2011, August 29). Investing in education is smart business . Retrieved from <http://www.usnews.com/news/articles/2011/08/29/investing-in-education-is-smart-business/> 

PayScale (2016). Human resources (HR) manager salary (United States). Retrieved from <http://www.payscale.com/research/US/Job=Human_Resources_(HR)_Manager/Salary> 

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StudyBounty. (2023, September 15). How to Calculate Return on Investment (ROI).


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