Financial
Compound Annual Growth Rate
Calculate the Compound Annual Growth Rate (CAGR), which shows the mean annual growth rate of an investment over a specified time period longer than one year.
Excel Formula
=(B2/A2)^(1/C2)-1Step-by-Step Explanation
1
A2 is the beginning value
2
B2 is the ending value
3
C2 is the number of years
4
B2/A2 gives the total growth ratio
5
Raising to power (1/C2) finds the annual rate
6
Subtracting 1 converts from ratio to growth rate
Example
| Start Value (A) | End Value (B) | Years (C) | CAGR (D) |
|---|---|---|---|
| $10,000 | $19,500 | 5 | 14.3% |
| $50,000 | $80,000 | 3 | 16.96% |
Result: Formula in D2: =(B2/A2)^(1/C2)-1 → 0.143 (14.3%)
Common Variations
CAGR as percentage
=((B2/A2)^(1/C2)-1)*100Returns 14.3 instead of 0.143
With RATE function
=RATE(C2,,-A2,B2)Uses Excel's built-in RATE function
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