Investment calculation formulas: An overview

Capital budgeting is a central component of the business decision-making process in companies. It helps to evaluate the profitability of investments and make well-founded decisions. In this article, we take a detailed look at the formulas used in static investment appraisal and business investment appraisal.

Static investment appraisal formulas

Capital Asset Value Method (NPVM):

  • The net present value method calculates the present value of the future cash flows of an investment and compares it with the initial investment costs. The formula for the net present value (NPV) is:
    KW = Σ(CFt / (1+r)^t) - I
    This means:
    • CFt for the cash flow in period t
    • For the discount rate
    • t for the period
    • I für the initial investment costs

Internal rate of return (IRR) method:

  • The internal rate of return method searches for the interest rate at which the capital value of an investment is equal to zero. The formula for the internal rate of return (IRR) is determined by an iterative calculation.

BWL investment calculation formulas

Amortization calculation:

  • The amortization calculation calculates the time required to recover the initial investment through the expected cash flows. The formula for the amortization period (AT) is:
    AT = I / ΣCFt
    • I für the initial investment costs
    • ΣCFt for the sum of cash flows in all periods


  • Return on investment measures the relationship between the income from an investment and the cost of capital required for it. The formula for profitability (R) is:
    R = (ΣCFt - I) / I
    This means:
    • ΣCFt for the sum of cash flows in all periods
    • I für the initial investment costs


Capital budgeting is an essential part of the business decision-making process. Using the right formulas is crucial to making informed decisions about investments. Both static and managerial capital budgeting methods offer different approaches to evaluating investments. It is important to select the appropriate method according to the specific situation and requirements of the company.