Calculating Growth Rate

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Compound Annual Growth Rate (CAGR) Calculator

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What is Compound Annual Growth Rate (CAGR)?

The Compound Annual Growth Rate (CAGR) is a financial metric that measures the average annual rate of growth of an investment or a business over a specified period of time, assuming that profits were reinvested at the end of each year of the investment's lifespan. It's a way to smooth out volatility and determine a representative, constant rate of growth over several years.

CAGR is particularly useful for understanding long-term trends and for comparing the performance of different investments or business units. Unlike simple average growth, CAGR accounts for the compounding effect, meaning that growth in one period contributes to growth in subsequent periods.

The formula used to calculate CAGR is:

CAGR = ( (Ending Value / Beginning Value) ^ (1 / Number of Years) ) – 1

In this calculator, you input the starting value of your investment or business metric, the ending value after a certain number of years, and the total number of years that have passed. The calculator will then provide you with the CAGR.

When to use CAGR:

  • To assess the historical performance of investments.
  • To compare the growth rates of different assets or businesses.
  • To project future growth based on historical trends.
  • To understand the smoothed-out growth of a revenue stream over time.
function calculateCAGR() { var beginningValue = parseFloat(document.getElementById("beginningValue").value); var endingValue = parseFloat(document.getElementById("endingValue").value); var numberOfYears = parseFloat(document.getElementById("numberOfYears").value); var resultDiv = document.getElementById("result"); if (isNaN(beginningValue) || isNaN(endingValue) || isNaN(numberOfYears)) { resultDiv.innerHTML = "Please enter valid numbers for all fields."; return; } if (beginningValue <= 0) { resultDiv.innerHTML = "Beginning Value must be greater than zero."; return; } if (numberOfYears <= 0) { resultDiv.innerHTML = "Number of Years must be greater than zero."; return; } var cagr = Math.pow((endingValue / beginningValue), (1 / numberOfYears)) – 1; var cagrPercentage = (cagr * 100).toFixed(2); resultDiv.innerHTML = "Beginning Value: " + beginningValue.toFixed(2) + "" + "Ending Value: " + endingValue.toFixed(2) + "" + "Number of Years: " + numberOfYears.toFixed(0) + "" + "Compound Annual Growth Rate (CAGR): " + cagrPercentage + "%"; }

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