ROI & Payback

From the book — Chapter 7. ROI = (gain − cost) ÷ cost × 100 — it tells you how much you got back for what you put in, but says nothing about how long it took. Payback period = cost ÷ net benefit per period — it tells you when you are whole again, but says nothing about what happens after. Read them together: a 200% return that takes four years may be worth less to you than a 60% return that pays back in five months. And remember the two costs that never appear on the invoice — sunk cost (money already gone, which should not drive the decision) and opportunity cost (what the same money would have earned elsewhere).