Growth Rate Calculator
Understanding Growth Rate
The growth rate is a fundamental concept used to measure how a certain value changes over a period of time. It's commonly applied in finance, economics, biology, and many other fields to understand trends and predict future outcomes. A positive growth rate indicates an increase, while a negative growth rate signifies a decrease.
In Excel, calculating growth rate is straightforward, and this calculator helps you do that. The most common way to express growth is as a percentage. The formula for calculating the average annual growth rate (AAGR) is:
AAGR = ((Ending Value - Starting Value) / Starting Value) / Time Period
However, a more accurate measure, especially for compounding growth, is the Compound Annual Growth Rate (CAGR). The formula for CAGR is:
CAGR = ( (Ending Value / Starting Value) ^ (1 / Time Period) ) - 1
This calculator uses the CAGR formula, which is generally preferred for its accuracy in representing average yearly growth over multiple periods.
Example:
Let's say you invested $100 (Starting Value) and after 5 years (Time Period), your investment grew to $120 (Ending Value).
Using this calculator with:
- Starting Value: 100
- Ending Value: 120
- Time Period: 5
The calculated Compound Annual Growth Rate (CAGR) will show you the average annual percentage increase your investment experienced over those 5 years.
function calculateGrowthRate() {
var startingValue = parseFloat(document.getElementById("startingValue").value);
var endingValue = parseFloat(document.getElementById("endingValue").value);
var timePeriod = parseFloat(document.getElementById("timePeriod").value);
var resultDiv = document.getElementById("result");
if (isNaN(startingValue) || isNaN(endingValue) || isNaN(timePeriod)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (startingValue <= 0) {
resultDiv.innerHTML = "Starting value must be greater than zero.";
return;
}
if (timePeriod <= 0) {
resultDiv.innerHTML = "Time period must be greater than zero.";
return;
}
// Calculate Compound Annual Growth Rate (CAGR)
var cagr = Math.pow((endingValue / startingValue), (1 / timePeriod)) – 1;
// Display the result as a percentage
resultDiv.innerHTML = "Compound Annual Growth Rate (CAGR):
" + (cagr * 100).toFixed(2) + "%";
}
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