CAGR Calculator & Excel Guide
Calculate the Compound Annual Growth Rate for your investments or business metrics.
Compound Annual Growth Rate
What is CAGR?
The Compound Annual Growth Rate (CAGR) represents the mean annual growth rate of an investment over a specified period of time longer than one year. It is one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.
How to Calculate CAGR in Excel
While this tool provides instant results, many financial analysts need to perform a CAGR calculation in Excel. There are two primary ways to do this:
Method 1: The Manual Mathematical Formula
The standard formula for CAGR is: ((Ending Value / Beginning Value) ^ (1 / Number of Years)) – 1.
In Excel, if your Beginning Value is in cell A1, Ending Value in B1, and Years in C1, use:
=((B1/A1)^(1/C1))-1
Method 2: Using the RRI Function
Excel provides a specific function for growth rates called RRI. The syntax is:
=RRI(number_of_periods, start_value, end_value)
Real-World Example
Suppose you invested in a portfolio five years ago. Here is how the CAGR would look:
| Metric | Value |
|---|---|
| Initial Investment (Year 0) | 10,000 |
| Final Value (Year 5) | 16,105 |
| Total Duration | 5 Years |
| CAGR Result | 10.00% |
Why CAGR Matters
CAGR "smooths" the returns of an investment. It ignores the volatility (the ups and downs) that occurred during the period and provides a single number that shows what the investment would have grown at if it had grown at a steady rate each year.