Calculating the Annual Growth Rate, often referred to as the Compound Annual Growth Rate (CAGR), is a fundamental skill for financial analysis, business planning, and investment tracking. While the calculator above gives you an instant result, understanding how to perform this calculation in Excel allows you to analyze large datasets efficiently.
Method 1: Using the Manual Formula
Excel does not have a dedicated "CAGR" function, but you can calculate it using the standard mathematical formula for compound interest in reverse. This is often the most flexible method.
To calculate the annual growth rate in cell D1, you would type:
=(B1/A1)^(1/C1)-1
Note: Make sure to format the result cell (D1) as a Percentage to see the rate correctly (e.g., 14.47% instead of 0.1447).
Method 2: Using the RRI Function
Excel 2013 and later versions introduced the RRI function, which is specifically designed to calculate the equivalent interest rate for the growth of an investment.
The syntax is:
=RRI(nper, pv, fv)
Argument
Description
nper
The number of periods (Years)
pv
Present Value (Beginning Value)
fv
Future Value (Ending Value)
Using the previous example data:
=RRI(3, 10000, 15000)
This method is often cleaner and less prone to parenthesis errors than the manual formula.
Method 3: Using the RATE Function
If you are accustomed to financial functions, the RATE function can also be used. This function is typically used for loans but works for CAGR if you treat the periodic payment (PMT) as zero.
The syntax is:
=RATE(nper, pmt, pv, [fv])
Crucial Step: When using the RATE function, you must enter the Present Value (pv) as a negative number (representing an outflow of cash) and the Future Value (fv) as a positive number.
=RATE(3, 0, -10000, 15000)
When to Use These Formulas
Use these calculations when you need to smooth out the volatility of year-over-year growth to understand the steady rate at which an investment or metric would have grown if it had grown at the same rate every year. This is essential for comparing the historical performance of different assets or business units.
function calculateCAGR() {
var startVal = document.getElementById('startValue').value;
var endVal = document.getElementById('endValue').value;
var periods = document.getElementById('periods').value;
var resultBox = document.getElementById('resultOutput');
var cagrDisplay = document.getElementById('cagrResult');
var absDisplay = document.getElementById('absGrowth');
// Convert inputs to numbers
var s = parseFloat(startVal);
var e = parseFloat(endVal);
var n = parseFloat(periods);
// Validation
if (isNaN(s) || isNaN(e) || isNaN(n)) {
alert("Please enter valid numbers in all fields.");
return;
}
if (s === 0) {
alert("Beginning Value cannot be zero for growth rate calculations.");
return;
}
if (n === 0) {
alert("Number of Periods cannot be zero.");
return;
}
// Logic for CAGR: (End / Start)^(1/n) – 1
var cagrDecimal = Math.pow((e / s), (1 / n)) – 1;
var cagrPercent = cagrDecimal * 100;
// Absolute growth
var absoluteGrowth = e – s;
// Display Results
resultBox.style.display = "block";
cagrDisplay.innerHTML = cagrPercent.toFixed(2) + "%";
absDisplay.innerHTML = absoluteGrowth.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}