How to Calculate the Rate of Return on Capital
Calculating the rate of return on a capital investment is a little bit tricky, and you'll need more than QuickBooks 2013. In almost every case, you need either a financial calculator (a good one) or a spreadsheet program, such as Microsoft Excel.
If you don’t have Excel, you should still be able to use a financial calculator or some other spreadsheet program.
Calculating a rate of return on a capital expenditure requires three steps:
Calculate the investment amount.
Estimate the net cash flows paid by the investment.
Use either a financial calculator (such as one of those fancy Hewlett-Packard calculators) or a spreadsheet program (such as Microsoft Excel) to calculate the rate of return measure.
If you can, use a spreadsheet program rather than going the fancy-calculator route — such calculators can be less than user-friendly. Roughly three decades ago, the joke among many young MBAs was that the ability to calculate the rate of return measures on a Hewlett-Packard 12C calculator was worth $40,000 a year. The slogan, in fact, was 40G for a 12C.