What does Yield on Cost (YoC) measure?

Yield on Cost (YoC) is a financial metric that evaluates the return on an investment relative to the total costs involved in its development. This measure is particularly relevant in industries such as real estate or capital projects, where understanding the profitability based on the total investment is crucial for decision-making.

By calculating YoC, investors can assess how much income is generated from an investment in relation to what was spent on it. It allows stakeholders to gauge the effectiveness of their investments and make informed choices about future projects or enhancements. The calculation typically involves the annual income produced by the investment divided by the total development cost, providing a clear picture of the returns relative to all incurred costs.

In contrast, annual salary returns, interest rates on loans, and unit costs of production focus on different financial aspects that do not directly relate to the overall profitability of an investment based on its development costs, making YoC a unique and important measure in evaluating investment performance.