Calculate CAGR in Excel: Compound Annual Growth Rate formulas

This tutorial explains the Compound Annual Growth Rate (CAGR) and provides multiple ways to calculate it in Excel. CAGR measures the average annual growth of an investment over a specific period, offering a clearer picture than simple year-to-year growth calculations. It accounts for compounding effects, providing a more accurate representation of investment growth.

The standard CAGR formula is: (EV/BV)^(1/n) - 1, where EV is the ending value, BV is the beginning value, and n is the number of periods.

The tutorial demonstrates several Excel methods for calculating CAGR:

1. Direct Calculation: A simple formula directly implementing the CAGR equation. This method can be adapted to automatically calculate the number of periods using the ROW function.

2. RRI Function: The RRI function directly calculates the rate of return, making it a convenient option for CAGR calculation. The formula is: RRI(nper, pv, fv), where nper is the number of periods, pv is the present value (BV), and fv is the future value (EV).

3. POWER Function: The POWER function raises a number to a specified power. The CAGR formula using POWER is: POWER(EV/BV, 1/n) - 1. Similar to the direct method, the ROW function can automate period calculation.

4. RATE Function: The RATE function calculates the interest rate per period of an annuity. While seemingly complex, it can be adapted for CAGR calculation: RATE(n,,-BV, EV). Remember to input BV as a negative value. The ROW function can again be used to determine the number of periods.

5. IRR Function: The IRR function calculates the internal rate of return for a series of cash flows. To use it for CAGR, restructure the data: input BV as a negative value, EV as a positive value, and all intermediate values as zero. The formula is simply: IRR(values).

The tutorial includes illustrative screenshots and a downloadable Excel workbook for practice. All methods yield the same CAGR result, demonstrating the flexibility of Excel in financial calculations. The choice of method depends on personal preference and data organization.

(Note: The image URLs are placeholders and need to be replaced with actual image URLs if you intend to use this output.)

The above is the detailed content of Calculate CAGR in Excel: Compound Annual Growth Rate formulas. For more information, please follow other related articles on the PHP Chinese website!